Market News

Canada

Canadian newspapers ran multiple stories about a practice known as “shadow flipping,”where a real estate agent uses an assignment clause in the sale and purchase agreement to resell a property before the first sale closes. Critics claim that shadow flipping is contributing to the rapid rise in home prices in Vancouver and there have been allegations that flippers are evading taxes. Readers in Hong Kong will recognize shadow flipping as a confirmor sale, which the Hong Kong government banned for off the plan sales in 2010.

Effective February 15, buyers of homes in Canada must make a down payment of at least 10% on the portion of a home’s price that is between C$500,000 and $1 million. The minimum down payment on the first $500,000 remains at 5%.

British Columbia’s 2016 budget featured several housing-related measures, including higher transfer taxes for luxury homes, tax breaks for Canadian citizens and permanent residents buying newly built homes, and a plan to track citizenship of foreign buyers.

China

The Chinese government introduced several measures to stimulate the property market. The minimum down payment for first-time buyers outside Tier 1 cities (Beijing, Guangzhou, Shanghai and Shenzhen) dropped from 25% to 20%. For houses larger than 90 square meters, the deed tax was reduced from 2% to 1.5% for first-time buyers nationwide. For second home purchases, the deed tax fell to 1% for homes under 90 square meters and 2% for homes over 90 square meters. Dwellings in Beijing, Guangzhou, Shanghai and Shenzhen, will continue to be taxed at 3%, regardless of size. Sales of homes outside Tier 1 cities that are held for more than two years are now exempt from business tax.

The central government also stopped releasing land for development in cities that have a glut of unsold property and increased the interest rate for deposits in the housing provident fund. It also prohibited local governments from borrowing money from banks for land purchases. The government announced that it would ban new construction of gated communities and open existing ones to the public.

China deployed fighter jets and surface-to-air missiles on Woody Island—which is claimed by China, Vietnam and Taiwan—in the South China Sea. China’s Foreign Minister Wang Yi described the missile installation as a self-defense facility, a view that is not shared by China’s neighbors.

Hong Kong

In his 2016/17 budget, Finance Secretary John Tsang waived rates (property taxes) during 2016/17, subject to a ceiling of HK$1,000 per quarter. He also announced that the government would supply 280,000 public housing units between 2016/17 and 2025/26.

A homeowner who sold two small apartments to buy a larger home for his family won a court case against the Inland Revenue Department, which had charged him double stamp duty under the amended Stamp Duty Ordinance. The court found that Ho Kwok-tai qualified for an exemption that applies to owners who buy a new property for their own use after selling their previous home within six months.

Japan

Japan’s population fell 947,000 in the five years ended in 2015, to 127.1 million. It was the first decline since the census began in 1920. From 2010 to 2015, Tokyo’s population grew 2.7%, to 13.5 million.

In February, I met a senior official from the Ministry of Land, Infrastructure, Transport and Tourism who told me that the ministry is preparing several programs to increase transparency in Japan’s property market and promote Japanese real estate abroad.

In February, Tokyo’s Ota-ku became the first municipality in Japan to formally approve Airbnb-style short-term rentals. A similar program, which is known as minpaku, is expected to begin shortly in Osaka. A more critical view is available from Bloomberg, which sees the program’s regulations as a tool to cripple Airbnb’s business in Japan.

Kansai Electric restarted reactor 4 at the Takahama nuclear plant. Four of Japan’s 44 reactors are now operational.

Taiwan

After a magnitude 6.4 earthquake struck Taichung on February 6, the 17-story Weiguan Golden Dragon Building collapsed, killing 114 of the 116 people who died in the earthquake. News reports—which include photos of concrete walls filled with empty cooking oil cans—claim that mortgage lenders and neighbors knew the building had a reputation for quality problems.

Trends and ideas

An economist on home ownership

In a brief post on Quora.com, Alex Tabarrok, professor of economics at George Mason University in the United States, summarizes the economic case for home ownership. The bottom line? From an economic perspective, you should rent instead.

A cautionary tale

If you’ve read my books, you know I am a big believer in research. Here’s an example of what happens when you don’t do your homework before purchasing a home. The buyers missed three key clues: a vendor who accepted their first offer without haggling, a home inspector who seemed apologetic and the cherry on top: the home’s problems had been covered in the New York Times.

Censorship rising in Asia

The governments of Japan and China tightened control over the media. In Japan, outspoken broadcasters at TBS, NHK and TV Asahi were fired or forced to resign after allegedly irritating the Abe administration. Chinese authorities suspended the Sina and Tencent accounts of celebrity blogger and property developer Ren Zhiqiang for “posting illegal information,” while the Ministry of Industry and Information Technology announced a directive banning foreign-owned media from publishing online content without government approval. The directive is bad news for news organizations such as Bloomberg and the New York Times that have invested heavily in building an online presence in China and comes on the heels of the continuing controversy over the disappearance of five Hong Kong book sellers.

Internet of things

Here’s another concern for anyone thinking of adding the Internet of things to their home: government surveillance. In February, James Clapper, director of national intelligence in the United States, testified in that governments are likely to use the IoT to spy on their citizens. A recent study (PDF) by Harvard University echoed Clapper’s assertion.

Virtual real estate

According to the New York Times, virtual reality has much potential for real estate agents and developers—particularly those selling overseas property—but isn’t ready for prime time. Goldman Sachs, meanwhile, says virtual reality will be as transformative as the smart phone and predicts the VR market will be worth US$80 billion by 2025.

Over the Chinese New Year break, I read Ready Player One, a dystopian science fiction novel that industry insiders say offers insights into how VR could develop and how society could evolve with the new technology. Ready Player One was both thought-provoking and good pool-side reading.

Landed News

New, lower prices for Landed Japan and Landed China

The print editions of Landed Japan and Landed China have been reduced to HK$288 (US$36.95). The Landed Japan ebook is now HK$259. To reflect the higher postal rates that took effect at the beginning of the year, shipping and handling for all books has increased to HK$80. Delivery in Hong Kong is by messenger or first-class mail. International delivery is by first-class air mail.

Landed Hong Kong reviewed

Landed Hong Kong was reviewed in the January/February 2016 edition of The Correspondent (PDF), the official magazine of the Foreign Correspondent’s Club in Hong Kong.

Landed Newsletter No. 5. was published on March 1, 2016.