As the Chinese government acted to prevent a property bubble, introducing a property tax on homes sold within 5 years of purchase, stiocks in prperty developers fell, bringing Asian stock markets down with them. The Shanghai Composite Index fell 0.9%, closing at 3,274 and in Hong Kong, the Hang Seng Index was down 1.3% at 21,814. Japan’s Nikkei 225 Index dropped 0.2% to 10,083.
A good portion of the Chinese government stimulus money had been heading into speculative property investments, particularly in the luxury end of the market and in Hong Kong especially. Prasenjit K. Basu, Chief Economist at Daiwa said, “We have modest real estate bubbles that are emerging, but they are really at a very early stage.”
The tax is just 5.5% and unlikely to have a major impact on any emerging bubble, although the intention is to curb speculators rather than dampen demand completely and the government is also continuing other incentives including low mortgage rates and small deposit requirements for first time buyers.
Hardest hit were luxury property developers, with Gemdale dropping 5.1% and many Hong Kong based developers with interests ion the mainland falling also. Evergrande Real Estate dropped 3% and otyher luxury developers, including Greentown China Holdings, China Overseas Land and Shimao Property all falling. Country Garden Holdings, which is owned by China’s richest woman, Yang Huiyan, with a net worth estimated at $16 billion, fell almost 5%.
Hong Kong Luxury Developers Shares Fall
