Changing China

from Global Investing:

Home is where the heartache is…

On a recent trip home to Singapore, I was startled to learn just how much housing prices in the city-state have risen in my absence.

A cousin said he had recently paid over S$600,000 -- about US$465,000 -- for a yet-to-be-built 99-year-lease flat. Such numbers are hardly out of place in any major metropolis but this was for a state-subsidised three-bedroom apartment.

Soaring housing prices have fueled popular discontent -- little wonder as median monthly household incomes have stagnated at around S$5,000.

For its part, the government -- which houses 80 percent of people on the densely populated island -- insists that public housing prices are shaped by 'market forces', pointing to a raft of financing schemes to help first-time buyers.

What's less contentious is that Singapore is only part of a regional real estate boom that has driven property values by as much as 70 percent since the start of 2009 in cities such as Sydney, Hong Kong and Beijing.

Like Singapore, the government in China is acting to cool house prices that have skyrocketed in recent years out of the reach of a large swathe of its middle classes.

Chief among Beijing's policy arsenal is social housing. The government is stepping up construction of public housing, targeting a rollout 36 million affordable homes from now until 2015. At the same time, clampdown on property speculation has also helped ease Chinese housing prices.

from George Chen:

Winners and losers as Hong Kong rents scale new heights

By George Chen The opinions expressed are the author’s own.

When you walk around Hong Kong's Central commercial and business district these days, you may notice a number of stores are holding "removal sales", which means they can no longer remain in the same location. The reason? In most cases, just blame soaring rents.

Many analysts have forecast declines in residential and commercial property prices in Hong Kong for next year, although at a stable pace rather than a sharp drop. This may be true for some suburban areas where purchase options are more plentiful than those in downtown areas, but until that happens, prices are likely to keep rising, at least for the rest of the year.

A couple of years ago, mobile phone industry leader Nokia took a moderately sized space on Russell Road in Causeway Bay just opposite Times Square, one of the busiest shopping districts in Asia, for its flagship store in Hong Kong. Local media said the store used to be one of Nokia's busiest in Asia, thanks to mainland Chinese travelers. But the good old days are going to end soon.

The Hong Kong Economic Times reported on October 27 that British luxury brand Burberry had signed a new lease with the owner of a site currently occupied by Nokia. Burberry is said to have agreed to pay HK $6.5 million (about US $836,600) per month for the two-floor 5,200 square foot space,versus the HK $1.8 million that Nokia is paying.

When the news came out, the reaction from the market was quite naturally, "Wow". One reader on Sina Weibo, China's most popular micro-blogging service, wondered: "How many coats and bags will Burberry need to sell to cover the monthly rent?" In Hong Kong, a coat or bag at Burberry usually sells for about HK $10,000-15,000. You can do your own calculations.

from Summit Notebook:

The visible hand

Beijing's affordable housing projects -- which account for 10 percent of the government's huge $585 billion stimulus package, a key to propping up the crucial property market -- is making fans of low income wage earners, but has some developers seething.

Some developers see the government's role in the market as interference in market forces that are distorting prices.

"This market is monopolised, there is no fair competition," Feng Lun, the chairman of Beijing Vantone Real Estate Co, told the Reuters China Investment Summit.

"The government is increasingly controlling property prices," said Feng. "Whatever price they want that's where the price is."

The government's affordable housing is pulling prices down around the country, according to Feng.

The government's motives are rooted in simple math.

Investment in residential housing made up about 10 percent of gross domestic product before the property boom turned to bust in 2008, roughly the same as the country's huge export sector.