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China: Overview

Last Updated: Oct 01, 2009

China’s government spending push housing market to recover

Boosted by direct government intervention, housing sales and property prices in China rose in the first half of 2009.

House prices in 70 major cities rose by 2% (3.2% in real terms) in August 2009 from a year earlier, the third month of house price increases, according to data from the National Bureau of Statistics of China (NBSC).

Prompted by a fear of a forming property bubble in China, government officials implemented several measures to deflate the bubble in 2007, which led to a slowdown in house price growth in the first half of 2008. With the global financial crisis, house prices eventually dropped in the second half of 2008.

To encourage purchase of houses and help the residential property sector to recover, fiscal measures, which includes tax cuts and additional spending for the real estate sector, were introduced by the government. Buyers and developers took advantage of the relaxed lending conditions and lower interest rates.

With the revival of the real estate sector, residential property prices are expected to sustain its growth for the rest of 2009 and 2010, according to Colliers International.

Generally, only foreigners who have worked or studied in China for at least a year are allowed to buy a home. In addition, foreigners cannot be landlords. Exempted from these restrictions are Chinese living overseas and residents of Hong Kong and Macau.

Read Price History  »

RENTAL YIELDS

Last Updated: Feb 26, 2009

Chinese yields average 4.42%

In China gross rental yields on apartments average a modest 4.42%, based on our sample of high-end used apartments in five prime cities - Beijing, Chengdu, Guangzhou, Shanghai and Shenzhen.

Read Rental Yields  »

TAXES AND COSTS

Last Updated: Dec 10, 2008

Taxation differs in each municipality in China

Rental Income: In general, leasing property is subject to business tax, individual income tax, and real estate tax. In Shanghai, gross rental income is taxed at an integrated rate of 5%.

Capital Gains: Net gains from transfer of property are taxed at a flat rate of 20%.

Inheritance: There is no inheritance or gift tax in China.

Residents: Rental income earned by resident individuals is taxed at a rate of 10%.

Read Taxes and Costs  »

BUYING GUIDE

Last Updated: Nov 16, 2006

Buying costs are moderate in China

Total round-trip transaction costs are around 4.86% to 13.65% of the property value. Most of the costs are shouldered by the buyer, including the 3% - 5% Deed Tax and Business Tax of 5%. There are three procedures needed to register property which is usually completed in 32 days.

Read Buying Guide  »

LANDLORD AND TENANT

Last Updated: Jun 19, 2006

Chinese law is pro-landlord

The Chinese system is generally pro-landlord.

Rent: There is no rent control in major centers such as Beijing, Shanghai, Guangzhou, and Shenzhen. Rent adjustments are subject to the provisions of the contract.

Guaranty Money: The landlord typically collects guarantee money (security deposit) of two to three months rent on top of a month's advance payment. If the tenant prematurely terminates the contract, he loses the guarantee money and down payment.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Last Updated: Oct 01, 2009

Growth slows due to exports

China, once called the Sleeping Giant, is one of the world’s fastest growing economy. With 1.3 billion people, it is the most populous nation and the second biggest in land area. Its economy, currently among the biggest in the world, is expected to overtake that of the US within a decade.

China saw economic reforms under Deng Xiaoping after more than two decades of stagnation under the authoritarian rule of Mao Zedong. In the early 1980s, collective farming was dismantled and private enterprises were allowed to flourish.

Growth in the Chinese economy slowed to 9% in 2008 after posting a record 13% GDP growth in 2007. Prior to the global financial crisis, growth in the economy was slowing due to the tight monetary policies implemented by the government.

Due to the drop in foreign demand, growth in Chinese exports slowed to 17% in 2008, according to NBSC. Growth in imports also slowed to 18%, due to the falling consumer confidence and uncertainties in the economy. To support the export industry, the government has been keeping exchange rates stable at CNY6.83 per dollar from July 2008 to August 2009. Foreign exchange reserves grew by 18.7% to US$2.13 trillion in June 2009 from a year earlier.

 

  • Fastest growing economy
  • High yields in Shanghai
  • Pro-landlord rental market
  • Uncertainty over rules and laws
  • Property rights issues
  • Aliens cant be landlords

RESIDENTIAL PROPERTY FACTS
Price (sq.m): $2,834 For a 120 sq. m. property, usually an apartment. Rental Yield: 3.55% For a 120 sq. m. property, usually an apartment.
Rent/month: $1,006 For a 120 sq. m. property. Income Tax: 5.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 5.3% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 4.7% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord & Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.


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