Thursday, July 14, 2011

China Expands Purchase Limits to 2nd and 3rd Tier Cities

No slacking on tightening measures. Repeating the pledge to build more affordable housing, but it's unclear where the funding will come for that.

China Expands Home-Purchase Limits
Housing transactions in major cities have declined in recent months following a series of anti-speculative measures. However, transactions in second- and third-tier cities have increased due largely to investors moving further inland where the restrictive policies aren't as rigorously enforced.

"Purchase restrictions in some first-tier cities are having an effect and big property developers are starting to cut prices. So the government probably wants to take the restrictions to other cities to curb speculation," said Michael Klibaner, Asia-Pacific regional director at Jones Lang LaSalle.

3 comments:

another value investor said...

Great blog with insightful info. I am wondering how this purchase limit policy affects the Vancouver RE market. A local (Vancouver) bull told me that this would be an at least short-term boost for Vancouver RE, since some people who now cannot buy in China will move their money offshore and buy in Vancouver / AUS instead. What do you think about this argument?

GG said...

I think the new limits will have a bigger impact in other areas of Asia where the Chinese have been buying, less so Vancouver. Accessibility is a big part of this. A buyer who is choosing to buy elsewhere because they are blocked from investing in a 3rd tier Chinese city is going to go with the next most accessible option. Only recently have real estate reps from Canada opened shop in China to offer this kind of access to property.

The exodus of money out of China, and the surge of buying in Vancouver, started way before the property buying limits were imposed. Chinese buying in Vancouver when it has been profiled/surveyed at all appears to be wealthy/connected people looking for a backup place of residence in case things go south in China. Buyers with that sort of mentality are not going to see Chinese property as a rational alternative to their Vancouver purchase.

On the other hand, pooled purchases may be the place where the impact will show up. The kind of purchase where a representative makes buys for a group of investors back in China. That money might be choosing between 2nd and 3rd tier cites and Vancouver as an either/or option. No one knows how big this is, though. There has only been anecdotal evidence (flyers in Chinese).

jesse said...

Great so now we have pooled wealth funds speculating on real estate. No problem here!