Land Rights Issue Still Heating Up

SCMP offers more coverage: China’s grey-area for property buyers: homeowners face doubts over renewing land-use leases
“It is a pressing issue. The government needs to resort to legal means to solve the problem,” Xinhua said, adding that a blurry definition of home ownership could potentially cause social unrest.

At the beginning of this year, official media called for a public discussion on the value of property investment. Many commentators thought the move was aimed at cooling the property market amid fears of a bubble.

“It doesn’t make sense if homeowners or their offspring are required to pay further millions of yuan to continue to own their houses,” said Shen Ye, 42, a Shanghai homeowner.

...“The question could be answered when China officially starts imposing property tax,” said Joe Zhou, property service firm JLL’s head of research in China. “With the property tax, homeowners can continue to own their houses and automatically renew the land-use agreement after 70 years as long as they continue to pay the tax.”
Whether solved with a property tax or formalized rights sales, what happens to home values? Some Chinese investors treat homes like gold bars, but homes are not gold bars. Stick a gold bar somewhere and in 100 years you still have a gold bar. Houses have upkeep costs, a finite life, and once property tax is introduced, a significant annual cash cost.

Aside from the speculators, there are those who treat their property like an investment and value it based on the cash flow. Rental yields are so low in cities such as Beijing that a property tax is bound to chew up 50% or more of rental income.

Settling the issue of land rights is positive, but the discussion around this issue is unlikely to be positive for home prices in the short-term.

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