Market News

Australia

Effective July 1, 2016, foreign buyers will be required to pay a stamp duty surcharge of 4% of their home's purchase price. Stamp duty for off the plan purchases must be paid within three months and foreign buyers will no longer be entitled to a 12-month deferral. Starting on January 1, 2017, foreign buyers will have to pay a 0.75% land tax surcharge. At the state level, New South Wales, Queensland and Victoria have introduced or are introducing taxes on foreigners buying real estate of 4%, 3% and 7%, respectively.

Buyers of new apartments in New South Wales will get added protection against construction defects when the Strata Schemes Management Act 2015 takes effect in November 2016.

The Victorian Civil and Administrative Tribunal has ruled that a tenant renting out part of their home through Airbnb created a license and not a sublease and, as a result, the landlord did not have grounds to terminate the tenancy. The landlord has appealed the decision to the Supreme Court of Victoria.

Canada

Canada's central bank—The Bank of Canada—and three commercial banks have joined the list of organizations warning that the Canadian real estate market—particularly Toronto and Vancouver—is dangerously overheated.

Vancouver Mayor Gregor Robertson said the city will introduce a tax on empty houses, with or without provincial support. Robertson gave the province until August 1 to respond to his proposal.

China CITIC Bank has obtained a court order in British Columbia freezing the assets of a businessman accused of fleeing China and buying Vancouver-area homes after the businessman defaulted on a RMB50 million (US$7.5 million) loan. The court case comes amid a corruption crackdown in China and questions about the legitimacy of offshore funds used to buy homes in Vancouver.

May was another record breaking month for home sales in Vancouver. There were 4,769 sales, a 17.6% increase from May 2015, but 0.3% lower than April 2016. The benchmark sale price was $889,100, a 29.7% increase from May 2015.

In a prediction that it may come to regret, the B.C. Real Estate Association said home sales in Greater Vancouver will increase 8.95% in 2016, to 47,000 homes. The average sale price for homes is expected to reach C$1.125 million, up 24.6% from 2015.

Visual Capitalist has produced an interesting infographic on Vancouver’s housing bubble. In a similar vein, data analysis company MountainMath has assembled an interactive map showing the changes in Vancouver’s assessed property values between 2005 and 2015.

China

Developers are paying record prices for land in first- and second-tier Chinese cities. Many of the multi-billion yuan transactions are far above expected prices, leaving analysts wondering if the underlying projects will be profitable.

In the first quarter of 2016, Chinese offshore property investment fell 30%, year-on-year, to US$3.4 billion, according to research by JLL. Regulatory restrictions and greater scrutiny of funds leaving China are cited as reasons for the fall.

Reverse mortgages are a bust in China. Only 59 households in Beijing, Guangzhou, Wuhan and Shanghai participated in a two-year pilot program to launch reverse mortgages, which let homeowner over age 60 unlock equity in their homes.

China raised the stakes in the regional territorial dispute by announcing the construction of an underwater base in the South China Sea. The “oceanic space station,” could be 3,000 meters below the ocean’s surface. In a related development, Japan issued a diplomatic protest when a Chinese warship was spotted near disputed islands in the East Japan Sea. Three Russian warships were also seen near the Japanese-controlled islands, which are known as the Senkakus in Japan and the Diaoyus in China.

Wukan—the city in Guangdong Province that was the site of mass protests over land seizures in 2011—is back in the news. Two thousand villagers staged peaceful protests against the arrest of local party secretary Lin Zuluan and the return of their confiscated land.

A new paper by the Lincoln Institute predicts that a 15–20% property price drop could cause a recession, if China follows the pattern of other large economies that have experienced property-related asset crises. The paper also says that a 40% decline is possible.

Hong Kong

Property sales in Hong Kong improved in May. There were 6,065 sale and purchase agreements, up 8.1% on April, but down 11.3% year-on-year.

Non-profit organization Designing Hong Kong has uncovered evidence that more than 50 applications to build small houses in the New Territories involve land that was bought by developers and transferred to the applicant just before the application was filed with the government. This practice was previously found to be illegal.

The owner of a Shenzhen property firm bought a 9,000-square-foot house on the Peak for a record HK$2.1 billion (US$270 million), saying that his existing, 5,000-square-foot apartment in Midlevels was “too tiny.” The transaction involved the sale of a holding company, allowing the buyer to legally avoid HK$170 million in stamp duty.

In a surprise move, Sun Hung Kai Properties offered financing of up to 120% of the value of apartments in its Park Yoho Venezia development in Yuen Long. Applicants do not need to provide proof of income, but other conditions apply. The Hong Kong Monetary Authority, the city’s de facto central bank, expressed concern over the financing arrangements

After a fire in Kowloon that took the lives of two firefighters and burned for four days, the Hong Kong government began inspecting mini-storage facilities in industrial buildings, many of which do not have sprinkler systems. The Fire Services Department may require the removal of illegal structures. That could spell the end of an unofficial policy of ignoring people living illegally in these buildings.

Indonesia

Depressed commodity prices and restrictions on employing foreigners have created an "expat exodus" from Indonesia and a glut of luxury accommodation. A house with a garden and pool in Jakarta's Kemang neighborhood can be rented for US$3,000 per month.

Japan

During the first quarter of 2016, land values climbed in 89 of 99 districts surveyed by the Ministry of Land, Infrastructure, Transport and Tourism. Prices in the remaining 10 areas were flat.

The Tokyo Metropolitan Government is embracing hydrogen fuel cells, with plans to power the 6,000-unit Olympic village exclusively with hydrogen fuel cells.

At the end of June, I spent three days in Ishigaki, an island southeast of Taipei that is now served by non-stop flights from Hong Kong. I was very impressed with the island's beauty and tourism potential.

Thailand

Thailand introduced a land and buildings tax with maximum rates of 0.2% of the appraisal value of agricultural land, 0.5% for residences, 2% for commercial use and 5% for vacant land. Primary residences valued at less than B50 million (US$1.4 million)—or more than 99% of the country’s homes—will be exempt from the tax.

Trends and Ideas

AEDs

Automated external defibrillators (AEDs) are devices that administer an electric shock to a person who has suffered a cardiac arrest, potentially saving their lives. AEDs are an increasingly common sight in shopping malls and even housing estates. This article from Spectrum, a magazine published by the Institute of Electrical and Electronics Engineers, looks at how AEDs work and problems with their use, including the risk that they don't work when they are needed.

Airbnb

New York State has passed a law banning short-term rentals like Airbnb. In California, Airbnb is suing the city of San Francisco, which introduced regulations forcing Airbnb hosts to pay US$50 and register with the city in person. If hosts do not comply, Airbnb can be fined $1,000 per day, per listing.

The Atlantic Cities has a roundup of Airbnb regulations in several European cities, including Amsterdam, Barcelona, Dublin, Paris and Reykjavik.

Airbnb says it is working hard to promote inclusiveness after a Harvard study found that travelers with “distinctively African-American names” were 16% less likely to be accepted than users with “white-sounding” names. Meanwhile, two new startups—Noirbnb.com and Innclusive.com—are targeting people of color.

Brexit

British voters’ decision to leave the European Union drove the pound to 30-year lows against the U.S. dollar, roiled stock markets around the world and saw the U.K.’s credit rating drop from AAA to AA.  The vote sparked fears that multinational companies and international investors will flee London, hurting property prices. However, bargain hunters have already appeared.

Inspiration

The University of Southern California has digitized 1,300 teaching slides that detail mid-century modern California architecture. The slides, which are from the collections of Fritz Block and Pierre Koenig, are a great source of inspiration.

Privacy

A British startup called Score Assured has created a data-mining application that lets landlords check the social media profiles of prospective tenants. The service promises to provide insights into renters' personalities and creditworthiness.

Vacant homes

In a taste of what may soon happen in Vancouver, owners of second homes and vacant dwellings in Paris may see their property taxes increase by up to five times.

Landed News

I will be speaking speaking at or moderating several events in the months ahead, including the PERE Japan Forum 2015 on September 15 in Tokyo.

Landed Newsletter No. 9 was published on July 1, 2016.