Market News

Canada

Canadian tax authorities have launched an investigation into the British Columbia real estate market, targeting speculators who are not declaring income from real estate transactions and people with low reported income who are buying luxury homes.

The Canada Mortgage and Housing Corporation’s third-quarter report [PDF] notes that the national housing body “detects strong evidence of overvaluation for Canada as a whole” and notes that “Vancouver and Toronto now both show strong evidence of problematic conditions.”

Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, is tightening mortgage standards as housing prices continue to rise. The regulator also told some lenders to test their ability to withstand a 40–50% drop in property prices in Toronto and Vancouver.

British Columbia introduced a 15% tax [PDF] on Vancouver-area homes purchased by foreigners, including corporations, creating a stampede to complete transactions before the August 2 deadline. Agents claim that foreign buyers are abandoning purchases and forfeiting deposits as a result of the new tax. Meanwhile, in July, Vancouver area home sales dropped 19% year-on-year and 27% from June.

A B.C. government survey showed that Mainland Chinese people represented just 3% of residential property buyers in Vancouver. The survey was conducted between June 10 and 29, after a requirement that proof of citizenship be included on property tax transfer forms. However, industry insiders say the government’s statistics are “way off.”

Japanese architect Shigeru Ban will design a residential tower in Vancouver that is claimed to be the tallest hybrid timber structure in the world.

China

Home prices in China rose for the 15^th consecutive month. Average prices for new homes in 100 cities increased nearly 2% in July.

The Permanent Court of Arbitration at The Hague ruled China's territorial claims in the South China Sea were invalid. In response, Chinese authorities said that they would ignore the ruling and people protested by boycotting fast food chain KFC and smashing their iPhones. Fan Changlong, vice chairman of the Central Military Commission called for troops to be “ready for combat” and China announced military drills in the South China Sea. In related news, Japan complained after several hundred Chinese vessels entered disputed waters in the East China Sea, near islands known to the Japanese as the Senkakus and to the Chinese as the Diaoyus.

The village head of Wukan, Guangdong—the site of protests by residents over land seizures in 2011—was arrested for bribery. The central government instructed the media not to report on the issue.

China issued restrictions on original (ie nonstate-sourced) news reporting, making it harder for people to conduct research on a variety of topics, including housing.

Hong Kong

A second major fire broke out in a Hong Kong industrial building in three weeks. The Cheong Fat Factory Building in Cheung Sha Wan contained mini-storage units as well as illegal residences. The government announced that it would step up enforcement of lease violations and said that it may make subdividing industrial buildings a criminal offense. News reports indicate that businesses operating illegally in industrial buildings are feeling the effects of the government crackdown. If you are thinking of buying industrial property, this could be a good time to start researching your purchase.

Two developers were successfully prosecuted for violating the Residential Properties (First-hand Sales) Ordinance. Oriental Style Limited was fined HK$200,000 (US$25,800) after pleading guilty to 13 charges relating to its Ocean One development in Yau Tong and No 1 Team Limited, a subsidiary of Tung Chun Soy Sauce, was fined HK$720,000 for violations at its Full Art Court development in Sham Shui Po. The cases were the first two prosecutions under the ordinance.

In July, property sales fell 27%, year-on-year, and 11% from June.

Indonesia

Coordinating Minister for Political, Legal and Security Affairs Luhut Pandjaitan said Indonesia would issue an emergency law, called a perppu, allowing foreigners to buy property. Under current Indonesian law, it is very difficult for foreigners to own real estate.

Japan

Land prices in Japan rose an average of 0.2% for the year ended January 1, 2016. Prices in Tokyo increased nearly 3%, while a street in Hokkaido’s Niseko ski area jumped 50%.

The Ministry of Land, Infrastructure, Transport and Tourism will set up a program to allow vacant homes to be rented out to elderly people and low-income families with children. There are more than 8 million empty homes in Japan, a figure that is expected to reach 20 million by 2033.

Police and protesters in Okinawa clashed over the construction of helipads by the U.S. military. In a bid to defuse local anger, the U.S. reiterated plans to return 4,000 hectares of land to the Okinawa government

Malaysia

Citylab has an interesting look at the redevelopment of Kampung Baru, a 300-acre (121 hectare) village in the center of Kuala Lumpur that’s been valued at US$1 billion. Kampung Baru’s local government structure makes it similar to the urban villages in southern China that I wrote about in Landed China.

New Zealand

Auckland is paying low-income residents up to NZ$5,000 (US$3,600) to leave the city, in order to alleviate a chronic housing shortage.

Singapore

Prices of Housing & Development Board (HDB) apartments were flat in the second quarter of 2016. Resale prices for HBD units are 10% below their recent peak, while private homes are down 9%.

Singapore and Malaysia signed a memorandum of understanding for the construction of a high-speed rail link between the city state and Kuala Lumpur. The service is expected to start in 2026.

Vietnam

Oliver Massmann of the law firm Duane Morris reviews recent legislative changes that make it easier for foreigners to buy real estate in Vietnam. While the situation has improved, several impediments continue to limit Vietnam’s attractiveness.

Trends and Ideas

Brexit

As a result of economic uncertainty surrounding the Brexit vote, six U.K. property funds froze withdrawals.

Climate Change

The San Francisco Chronicle has a long-form feature about the effects of rising seas on that city, the steps being taken to address the problem and its effects on some of the world’s most expensive real estate.

Negative Interest Rates

The U.K.’s RBS banking group and ABN AMRO from the Netherlands have warned that they may start charging commercial clients for the money held on deposit. Are negative rates for individuals next?

You Might Not Want To Buy After All…

According to Yale University professor Robert J. Shiller, houses and land have not been a particularly good investment in the past and technology may make them an even worse investment in the future.

Landed News

On July 27, I delivered a presentation to the Japan-America Real Estate Coalition Office in Tokyo about foreigners buying property in Japan. A video of the presentation will be available soon.

In September, I’ll be participating in Mipim Japan in Osaka and the PERE Japan Forum in Tokyo. I hope to see you there!

Landed Newsletter No. 10 was published on August 10, 2016.