Sunday, May 23, 2010

Did China just Blink!!

Ok folks forget my last post.

It looks like China has the Western disease. They cannot quite bring themselves to burst a bubble. You see, there is no property tax in China, so a lot of wealthy people buy homes and just sit on them. They don't even rent them out so they can stay pristine. It's like a property savings account.

The carrying costs are low..due to low interest rates and no property tax. Well the Chinese government who has always been tough and heavy-handed with speculators in the past said the tax was a-coming. Not fun if your holding half a dozen apartments in Beijing. God forbid- you may to sell one of them.

Well they may have blinked.

Tonight there are reports that the tax would be delayed for three years. Shares are soaring on the Shanghai exchange, led of course by property companies.
No one has the guts to kill or even pluck this goose until the dang thing is so big, that it plucks us!



  1. BTW folks- the wealthy off-shore absentee buyers are only picking up stuff in the super expensive d/t buildings, West Van and the Westside. I don't think they will buying stuff in the areas where most people live- like Maple Ridge or Coquitlam or Burnaby get the drift. So there affect is only on a small piece of the market.

    Until all Governments decide that assets need to be managed on the way up, so they don't have to be bailed out on the way down- we are in for more of these games.

    Lets see if indeed the Chinese did blink. There are some reports coming out from Government officials that it was false but the stock-market (which has better contacts) doesn't believe them.

  2. There has been little talk of the DEGREE of property tax proposed. The government could implement a 0.1% tax with little to no material effect on prices. What the market is scared about is them implementing any property tax infrastructure at all, thus making it easier to raise tax rates quickly.

    It could also be the government has devised another method of reining in speculation or thinks a tax is unnecessary to precipitate future spending on productive activities. It likely involves buying gold futures.

  3. Now Jesse - don't go yanking on Chad's chain :)

    BTW they ar discussing the CHMC 'legacy' on Vancouver Condo.

    We are on the hook for $500 Billion of the crapiest, no-skin-in-the-game mortgages.

    How can this end well??

    The Board of the CHMC, the Senior management and Flaherty have some explaining to do to Canadian tax-payers.