Newsletter No. 6 looks at federal and provincial efforts to cool Vancouver's housing market and some sobering statistics from Quebec; the divergence between China's booming Tier 1 cities and the rest of the country; signs of life in Japan's annual land price survey; changes to the laws governing foreign ownership in Indonesia; and more.
Effective July 1, anyone buying property from a foreign resident vendor will be required to remit 10% of the purchase price to the Australian Taxation Office. The new regulation, which applies to transactions over A$2 million, is designed to improve tax compliance by foreign residents.
The federal government has proposed an amendment to the Citizenship Act that would reduce the amount of time an immigrant must be physically present in Canada to qualify for citizenship from five years to three. The bill would also eliminate the “intent to reside” clause, which requires applicants declare that they intend to live in Canada.
Through a freedom of information request, Bloomberg learned that Canada Mortgage and Housing Corporation, the national housing agency, is gathering data from eight government bodies to track the funds used by foreigners to buy real estate in Canada. CMHC is also attempting to create a standard definition of a “foreign” buyer, a category that could include international university students. More from the CBC.
A “back of the envelope” estimate by a bank economist estimated that Mainland Chinese people represented one-third of the buyers of Vancouver homes in 2015. The calculations behind the estimate were widely criticized as being unscientific. Separately, the federal government issued a budget that included C$500,000 to study the effects of foreign ownership of Canadian property.
As older Vancouver homeowners cash-out, prices are rising rapidly in towns like Qualicum Beach, Parksville and Sechelt, which have become Canada’s top retirement destinations. Half of Qualicum Beach’s residents are over 65, the highest proportion in Canada.
Nearly 5% of the homes in Vancouver are empty, according to data based on electricity usage. For condominiums, the vacancy rate rises to 12.5%. Frances Bula examines the shortcomings of the research techniques used to reach these conclusions.
The British Columbia government has promised to introduce new regulations requiring owners selling their homes to expressly agree to shadow flipping. Under the proposed legislation, profits from these transactions would be returned to the original vendor. (See Newsletter No. 5 for more on shadow flipping.)
It would be easy to conclude that the red-hot Vancouver and Toronto markets are typical of the whole country. But that’s far from accurate. In February 2016, foreclosures in the province of Quebec were up 48% from the same month in 2015. (Article is in French).
In a bid to stabilize the property market, China is cracking down on lending by developers and real estate agents, which have been offering loans for home down payments. China is also tightening restrictions on peer-to-peer lenders. Authorities believe that borrowed down payments are contributing to rapidly rising prices in Tier 1 cities.
Shanghai raised the minimum down payment for second homes over 144 square meters or costing more than RMB4.5 million to 70%. Nonlocal buyers must now have been employed in Shanghai for five years to qualify for home ownership. Shenzhen increased the minimum down payment for second homes to 40% and required nonresident buyers to have made social security payments for three years. Meanwhile, Zhuhai, which is adjacent to Macau, has lifted all restrictions on nonresidents buying homes.
In a historic move, China’s central bank announced a pilot program that will allow farmers to use the land they work as collateral for bank loans. All farmland in China is owned by collectives.
In February, Hong Kong home prices dropped 2.2% month-on-month and 6.4% year-on-year. Average rents fell 2.9% MoM and 2.7% YoY.
Squatters in the New Territories had their homes demolished without warning, prompting some people to draw comparisons with the illegal demolitions that frequently occur in China.
Hong Kong property is so expensive that more than three-quarters of people aged 18–35 live with their parents, more than twice the level of the United States or the United Kingdom. (Paywalled Financial Times story)
Indonesia released details of a new law (Government Regulation No. 103 of 2015) about foreigners owning property in that country. The law clarifies the residency requirements for foreigners but does not allow nonresident foreigners to own homes in Indonesia.
For the first time in eight years, land prices in Japan rose modestly in 2015. As before, Tokyo and other large cities did well. Tourism drove some improvements: Osaka’s Shinsaibashi shopping district soared 45.1% and Niseko jumped nearly 20%. Sapporo, Sendai, Hiroshima and Fukuoka gained an average of 5.7%. Meanwhile, rural Japan continued to suffer: Commercial land prices in Akita prefecture are now 40% lower than in 2008.
Days before the fifth anniversary of the Great East Japan Earthquake, a district court ordered Kansai Electric Power to shut down the No. 3 and 4 reactors at the recently restarted Takahama nuclear power plant. Earlier in the month, The Japan News (Paywalled) reported that an active seismic fault had been discovered directly under Hokuriku Electric Power’s Shika nuclear power plant in Ishikawa Prefecture. As a result, the No. 1 reactor at the Shika plant may have to be decommissioned.
At the end of 2015, Japan had a record 2.2 million long-term and permanent foreign residents, up 5.2% from 2014. Chinese nationals topped the list, at 666,000, followed by 458,000 South Koreans and 230,000 Filipinos. Meanwhile, a study by Kyodo News showed that, in 2014, one child in 29 born in Japan had at least one foreign parent. Chinese nationals topped that list, too.
A new Shinkansen service between Tokyo and Shin-Hakodate-Hokuto Station in Hokkaido commenced operation on March 26. The new service shortens travel time between Tokyo and the ski slopes of Niseko.
Japan opened a radar station on Yonaguni, an island 150 kilometers south of the disputed islands that are known as the Senkakus in Japan and the Diaoyus in China.
Trends and Ideas
Hacking your home
Quora.com has an interesting piece on the modifications that engineers are making to their homes to make them more energy efficient and future-proof.
In February, the value of Hong Kong home sales plummeted 25% month-on-month and 71% year-on-year. In Metro Vancouver, meanwhile, February sales leapt 36%, setting a new record for the month. Prices in Shenzhen rose 52% in the 12 months ended in January 2016. In The Economist’s quarterly real estate survey, Japanese property is 28% undervalued, while Canada and Hong Kong are overvalued by more than 80%.
A blog post summarizing recent changes to real estate law in China is now available on the Landed website.
Newsletter No. 6 was published on April 1, 2016.