A significant part of the profits gained from the take-off of the country's economy are invested in real estate by Chinese companies and individuals. “There are very few alternative investment instruments in China: investments abroad are prohibited, and the stock market is very volatile,” says Yelena Yurgeneva, Development Director of the Elite Real Estate Department of Knight Frank. "Most people in mainland China have benefited greatly from the growth of the real estate market over the past decade and believe that investing in bricks and concrete is the most reliable and proven way to preserve wealth." Fears that skyrocketing prices could suddenly collapse plagued investors in early 2007, when, in an effort to curb the market, the Chinese government introduced new property taxes and tightened credit conditions. Then the world financial crisis made adjustments, and under the influence of new circumstances, the state policy of squeezing prices changed to the exact opposite. In November 2008, a stimulating injection of $ 585 billion into the state's economy was announced, some of which went to the construction of housing and infrastructure. In the period from January to December 2009, the property tax rate was reduced from 1.5 to 1% for buyers of the first house (up to 90 sq. M.); Individuals were not levied stamp duty and VAT on land. The residential real estate market quickly responded to stimulus measures. Buyers who missed out on home purchases during the 2008 price slump rushed to take advantage of the incentives, leading to incredible sales growth. According to Knight Frank, about 8 million new housing units were sold in the country in 2009 - a huge figure. For comparison: in the United States during the same period, 500,000 new properties were sold. In Beijing, where after the Olympics there was a surplus of supply, all the "extra" housing in 2009 was sold. Average apartment prices in Shanghai, Beijing and Shenzhen rose by about 87%, 63% and 66% last year, respectively. The average price per square meter in the country as a whole rose by about 25% over the year - this is the largest annual increase since the privatization of the residential sector in 1998. For example, in Shanghai, China's largest city with a population of 20 million people, the average price of housing on the primary market by the end of 2009 was $ 4583, in Beijing - $ 3303, Shenzhen - $ 3057 per 1 sq. m. Higher and higher In the first quarter of 2010, the market continued to grow. According to the March data of the National Statistics Center of China for January-February 2010, the volume of real estate transactions turned out to be about 30% more than in the corresponding period of 2009. Despite the rise in prices, the situation on the real estate market in March and the first half of April was close to excitement. A number of development projects in Beijing and Shanghai were completed on the first day of sales. There are 224 apartments in Hangzhou at a price of $ 2,650 per sq. m in one of the new complexes claimed more than 4,000 buyers, and in order to calm the passions, they even had to call the police. The situation seems surprising, especially since the average annual per capita income in China, according to the analytical center China Index Academy, amounted to about $ 2,500 in 2009. Thus, for the average resident, the cost of a two-bedroom apartment is equal to income over 30 years, which is significantly higher than the global average of 6 years. Some experts consider this a very disturbing symptom, noting that the ratio of the cost of housing to the average income of the population in China now exceeds the level that was recorded in the United States on the eve of the "explosion" in the real estate market. However, according to Knight Frank experts, such direct parallels are inappropriate, since the official data on income in China is often artificially underestimated. Danny Ma, director of the Chinese branch of the international company CB Richard Ellis, also considers a collapse in prices unlikely. “I see no reason to fear the formation of a bubble. In China, urbanization does not exceed 45%, so the real estate market has room to develop. In addition, the level of lending in the Chinese real estate market is much lower than in the United States or, for example, Japan before the collapse of prices in the early 90s. " The calm before the storm? Nevertheless, the government could not fail to draw attention to the fact that simultaneously with the rise in prices, so did public discontent, and in April it took a number of measures to curb the market. The conditions for issuing mortgage loans have become tougher. Banks were instructed to refuse to issue loans to buyers who already own two properties, and for buyers of second homes to raise the down payment from 40 to 50% and increase loan rates. The government has limited pre-sales of homes and has threatened to severely punish developers who deliberately postpone expected sales dates in order to understand prices. As a result, by June, the number of transactions with residential real estate in major cities of China fell by 60% compared to mid-April - the government suppressed demand. Following this, experts expect a slowdown in the growth of prices and construction volumes in many regions of the country. At the same time, according to The Wall Street Journal, "the slowdown turned out to be more extensive than that which can be directly explained by the new rules." “What has really cooled the market is uncertainty,” notes the vice president of IFM Investments Ltd. Kevin Young. Investors froze in anticipation: will there be new taxes on residential real estate? This issue has been discussed since spring, although no exact plans have yet been announced. According to Kevin Young, the current situation of uncertainty could last another three to six months. Other top managers in the industry give roughly the same forecasts. However, Kevin Young notes that people continue to look for housing and are interested in prices, although they do not dare to make a final decision. Foreign Investment The performance of the Chinese real estate market has undoubtedly attracted particular attention from overseas investors. However, the Chinese government strictly controls the amount of foreign investment and easily changes the rules if too much interest threatens market stability. Foreigners were allowed to buy real estate in China in 2001, but in 2007 the government imposed a number of restrictions on non-residents to combat speculation. In order to complete a transaction, a foreign buyer must submit documents confirming his stay in the country for a year (in Beijing during 2009, this rule did not apply). At the same time, he can purchase only one object and must sign a statement that he will use the apartment only for personal purposes. A foreign citizen has no right to rent out housing in China. It should also be borne in mind that in China there is no private ownership of land and the acquisition of real estate is possible only on the basis of leasehold rights: the land plot on which the building is located is leased for up to 70 years. In cities such as Shanghai, Shenzhen, Gangzhou and Nanjing, foreign buyers have practically pushed Chinese citizens out of the central areas as apartments are too expensive. In Shanghai, up to half of luxury real estate properties are owned by foreign buyers (including buyers from Hong Kong, Taiwan and Macau). According to Elena Yurgeneva, over the past year the interest of large Russian investors in elite real estate in the country's leading financial centers - Shanghai and Hong Kong, as well as in Beijing - has grown. However, today potential buyers from Russia are also waiting to see what the efforts of the Chinese government will lead to to make the market more accessible to the local population.
