Sunday, January 20, 2008

Land Speculation in China

"Even as its cooling efforts in the property market show signs of paying off, China is rolling out further measures to rein in the still-growing sector, taking aim this time at developers who snap up and hoard vacant parcels. ... [D]evelopers and investment funds from overseas have ... [bought] real estate [to] hang onto it, sometimes for years before building on it. ... The tax, of 20% of the land's purchase price, kicks in after a year; after two years, local governments can seize the land without compensating the developer. ... If the measure works as planned, it could push more supply into the residential market", WSJ, 9 January 2008.

In effect, China increased developers' interest rate by 20%, as opposed to increasing all interest rates. I expect this will cause Chinese land prices to fall.

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