I agree completely with you second sentence but not the first. GS represents corporate USA which is capitalist in nature, not free enterprise. I would recommend your post as well if it were not for this first statement. China jails crooks like GS, like housing speculators who by the way now have to pay a heavy tax if they sell within one year. This is what I'm getting at. Some argue that China is freewheeling capitalist but I don't see it that way at all. I see free enterprise at its best but needing government controls for quality assurance etc.
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Shanghai to Tax Real Estate Speculators
In the latest move to cool the steaming property market, Shanghai has imposed a 5.5 percent profit tax on those who sell their homes or apartments within the first year, the Shanghai Tax Bureau said on Sunday.
In a related development, the city announced the expansion of mortgage loan discounts for low-income residents.
Both measures are part of local government action to ensure a supply of affordable housing for all income levels.
"The tax move demonstrates the government's aim to reduce market speculation," said Zhu Huiping, director of the Shanghai Shenyang Property Agency.
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MY COMMENT....If the US had done this in the first place they wouldn't have had runaway home prices where huge percentages of new construction was built, not to live in but, for speculation
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In announcing the decision, the bureau said a business tax of 5.0 percent will be levied on the difference between purchase and sale prices for any property not held for more than 12 months. A separate fee of 0.5 percent will be applied as a city construction and education tax.
Prior to the rule change, real estate sellers paid no taxes while buyers handed in 1.5 percent of the property's value in deed and stamp taxes.
The new levy follows other actions taken by the city to try to head off a property bubble. Among the measures put in place last year were tougher rules for mortgages and development loans.
Some analysts are skeptical that the new tax will have much effect.
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MY COMMENT.....After the fact it did have an immediate effect and home prices tumbled to more reasonable levels and speculators moved their money to Vancouver instead where no such rules exist and thus helped cause a housing bubble here.
Sooooooo most everything below this line was in error as house prices did not keep rising. The date of the article is March 2005 so see the following article for what REALLY happened
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"With the city's housing prices continuing to rise, this move will not greatly dampen people's enthusiasm to purchase apartments," said Zhu.
The benchmark Shanghai Housing Index, which tracks selling prices and volume, rose 14.6 percent in 2004, the Shanghai Real Estate Index Office reported.
The index soared 27 points in January to 1,347 points, the biggest gain since November 2003, when it jumped 44 points.
Most analysts expect the run up in housing prices to continue this year, although the pace may slow.
"The tax policy will not greatly affect my decision to sell property," said Qian Guofen, an office clerk who owns three investment apartments. "What really counts is whether the city's housing prices have reached a peak. I don't plan to sell my apartments in the near term while prices are rising."
Meanwhile, the city government has revised its mortgage loan subsidies for families whose annual incomes are below 16,683 yuan (US$2,010).
Qualified applicants can receive mortgage interest discounts up to 15 percent of the property's value for their first home purchase. The ceiling on eligible properties was raised from 250,000 yuan to 330,000 yuan and from 3,500 yuan per square meter to 4,500.
Shanghai is also promoting the development of more low-income housing. In 2005, 8 million square meters of budget homes, or those priced below 3,500 yuan per square meter, will be put onto the market, while construction will begin on another 9 million square meters.
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Shanghai real estate prices cooled off in April (2005)
The series of government measures to clamp down on property speculation have begun to produce results in Shanghai, home to the country's hottest property market.
New home sales, a choice indicator of market activity, have been falling since early March. The biggest drop so far was registered last Monday shortly after the central government announced further and stronger measures.
Average daily sales of new homes in Shanghai have tumbled by at least 60 per cent in the past two months. On May 16, the figure hit 232 units and last week fluctuated within a narrow band between 200 and 300 sales per day. This is compared with 462 sales on May 9 and 604 on March 16, according to eHomeday, Shanghai's biggest property Internet portal.
Statistics compiled by eHomeday also show that April prices for Shanghai residential properties were down an average 9 per cent to 8,097 yuan (US$978) a square metre from the previous month. The biggest fall in square metre residential sales was in the peripheral districts, including Zhabei, Putuo and Minhang. Together they registered an average decline of 40 per cent in April.
The number of transactions in the secondary market has also dropped 50 per cent during the period, according to Midland Realty Consultancy (Shanghai), a leading real estate agent in Shanghai.
"It is obvious that the market has been very quiet for the past several weeks," said Calvin Lau, Midland's regional director. Many potential buyers are holding back from making a purchase while waiting for the dust thrown up by the government actions to settle. Meanwhile, more and more sellers are lowering their prices in a bid to offload their properties before the market gets any worse.
Among these keen sellers are the many speculators who are beginning to feel the intensifying pinch of the government-initiated credit crunch. What's more, many speculators are so highly geared that the price drop in the past few months has been enough to plunge them deep into the red, at least on paper.
"The government measures to curb property speculation have started bearing fruit as those speculators who could not unload their properties are now trying to rent them out in the hope of using the rental income to cover at least part of their loan servicing costs," Lau added. This, he said, has helped push down rentals of residential properties across the city.
According to Midland, supply in the secondary market has gone up significantly, causing prices to drop 15-20 per cent since March.
Last week, seven key ministries and government authorities including the People's Bank of China and Ministry of Construction announced what seemed to be the most stringent measures to stabilize property prices.
According to the measures, property owners who sell within two years of purchase will have to pay tax on the full sale price, effective from June 1. The central government did not specify the level of the tax but it is generally believed to be about 5 per cent.
The rule is more stringent than the Shanghai government's policy issued in March. The municipal government imposed a capital gain tax on properties sold within 12 months. The 5.5 per cent tax comprises a 5 per cent tax on the difference between the purchase and the sale price, and a 0.5 per cent construction tax.
"The market is now at a turning point," said Lina Wong, managing director of Colliers International (East China). "The strong measures aimed at clamping down on property speculation will effectively curb demand and affect sales of apartments in new projects," she added.
According to Colliers' latest survey, 65 per cent of buyers investing in Shanghai property costing more than 12,000 yuan (US$1,450) per square metre were owners/occupiers, while the remaining 35 per cent were investors, including some speculators.
Wong said the survey shows that the proportion of investors in the Shanghai property market is still unhealthily high, especially when compared to Nanjing, the capital city of Jiangsu Province, where the ratio is less than 20 per cent.
The latest central government measures also changed the land use conditions by requiring developers to begin construction on acquired sites within a shorter period of time. Land that is not developed for more than a year will be taxed, while those left unused for more than two years could have the land rights revoked. These measures could have the effect of increasing the supply of residential properties even at a time when prices are already falling.
"Developers should start getting used to the fact that it is not a seller's market any more," said Wong. "They should learn to cope with the new market conditions by becoming more cost efficient and quality conscious."
Michael Hart, associate director for research at Jones Lang LaSalle, an international property consultancy firm, told the China Daily that property prices in Shanghai would likely face correction in the next six to 12 months, after which prices would rise more steadily in the longer-term.
Source:Xinhuanet
2005-05-24
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Prices or homes got so expensive in 2004 in Shanghai that many people couldn't afford the land and so built on the water instead. The owner of this house is a peasant who makes cheap safety pins that bend when pushed through anything
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