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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (28412)	4/25/2005 12:54:46 PM
From: RealMuLan	Respond to of 116555

The price of 6,217 Yuan per sq. meter is from a Chinese article and here is the link. sh.focus.cn 24% is I calculated myself (8,153 Yuan before April 5th , See my last post on this below) Message 21211837 The foreign ownership – I read somewhere, do not have a link now. And that is an estimate, including not just residential property, also office buildings in Shanghai (most of office building, especially high-end ones are owned by foreign capitals). The point is that most of flippers in Shanghai are not local people. One needs big (international) capital to flipping properties in large quantity in Shanghai. Just last week I read an article talked about an overseas buyer group has >100 high-end apartments in Shanghai and wants to sell them after the new regulation in early April, but no buyers jump in. And there is quite a number of this type of overseas buyer groups. This is translated from the following article: According to an internal report by Shanghai gov. on March 26th this year, 46% of secondary housing sold in Shanghai in 2004 was held (by sellers) for <1 year. And bet. Jan. and Feb. 2005, this percentage increased to 51%. That means the number of flippers is increasing fast. During the last couple of years, flippers in Shanghai usually buy property around the Chinese New Year (Feb.), when the price is usually the lowest, and keep them till October and sell for 25% higher price. So an apartment of 1.5 million Yuan (mid-range in Shanghai) can have a net profit of >350,000 Yuan in 6 months. And there was NO tax whatsoever (until after April 6th this year) for the profit. But after the new regulation in April, the cost of flipping increased a lot. 1) The down payment for a 1.5 million Yuan apartment for buyers who already have at least 2 apartments increased by 300K Yuan (from 30% down pay before (450K Yuan) to 50% now (750K Yuan)). 2) The interest on the loan increased 350 Yuan/month. 3) If the property sold within one year of purchase, the sellers will be charged for 5.55% of sale tax. 4) And sellers also have to obtain a bridge loan (for the amount of outstanding loan) somewhere else before they can sell the property. 5) And since the original loan is 20 year period, in case returned earlier, the bank will charge 5% of fine on the amount of outstanding loan. So for the similar 6-month holding period (assuming the apartment still increases 25% in value), the cost of flipping increases by 67K Yuan. At the same time, the capital flow slows down quite a bit (assuming the property can be sold on time). Some flippers estimate that their profit will be down by 40-50% or more, and the risk is much higher (in case they cannot sell on time) sh.focus.cn Another thing Shanghai city gov. pledges, in order to solve the problems of lack of housing for locals, 2/3 of future residential apartment buidlings will be low/medium end which will have some income requirement.