CBRE releases Asia Pacific Investment Guide 2015
October 13, 2015, Shanghai – As international investors continue to diversify their real estate portfolios, Asia Pacific has recorded a steady flow of international capital with investment turnover increasing by 9% y-o-y to US$13 billion as of H1 2015. CBRE recently published a research report entitled Asia Pacific Investment Guide 2015 (hereinafter referred to as the “Guide”). The report provides a comprehensive overview of the investment terms, foreign ownership restrictions and key investment features of 15 markets in this region. The Guide suggests that APAC real estate offers investors with superior risk-adjusted returns despite recent turmoil in global equity markets.
Below is a summary
of major regulatory changes affecting Asia-Pacific real estate investment
market.
Real
estate-related taxation changes
Governments across the region have been pushing forward real estate-related taxation reforms in a bid to curb speculation. On August 5th 2015, the standing committee of China’s National People's Congress announced the legislative plan which listed the real estate taxation as one of the 34 tasks to be completed, reflecting the official launch of real estate taxation planning in China. In addition, a pilot program to replace business tax with value-added tax in real estate and construction sectors is high on the agenda.
According to the CBRE
report, an array of property cooling measures has been implemented in all major markets across Asia Pacific. Singapore
introduced a more rigorous debt servicing ratio to limit borrowers’ debt
leveraging to no greater than 60%, while Hong Kong doubled stamp duty to a
maximum of 8.5% and limited the maximum LTV ratio for commercial property
mortgage loan to 40%. Taiwan has announced a new Capital Gains Tax, effective
on 1 January 2016.
Loosening
of restrictions on foreign investment in real estate
In August 2015, the Chinese government announced the adjusted policies in relation to access and control of foreign investment in the real estate market. According to the new policies, a foreign-invested real estate company can borrow onshore loans, offshore loans and convert foreign loans into RMB even when its registered capital has not been paid in full. Instead, for investment value between US$10 million and US$30 million, the capital requirement can be 40% of the total investment while it can be only one-third if investment value is at US$30 million or above. This is the first time that the Chinese government has eased restrictions on foreign direct investment into real estate since August 2006.
Several emerging
Asian markets have rolled out similar measures in recent years. In Vietnam, the
government has permitted full foreign ownership of properties including
commercial for business purposes and residential on leasehold land, beginning 1
July 2015. The transfer of incomplete
real estate projects to foreign investors for continued development is also now
permitted. Indonesia recently announced plans to allow foreign investors to
acquire and trade luxury residential condominiums with a minimum value of IDR
5.0 billion (US$355,400). In India,
the new government relaxed foreign direct investment norms for Special Economic
Zones and eased the exit norms.
“The Chinese government
has reinforced incentives to foreign investors via the State Council’s Circular
62 and Circular 25 issued end-2014 and
mid-2015 respectively. Tax incentives are getting more regulated and in addition, the government also encourages
the development and construction of green buildings. A few incentive programs
are offered to investors, as these programs are
in line with China’s green transition strategy.
Also, not only foreign investors but also Chinese investors are set to benefit
from the launch of special zones such as Free Trade Zones and Qianhai
Shenzhen-Hong Kong Modern Service Industry Cooperation Zone,” commented Johnny
Shao, Executive Director, Head of Investment Properties, CBRE China.
Further
relaxation of ownership restrictions likely
As part of the government’s recent policies on foreign investment in real estate, restrictions on foreign ownership in China were modified. According to the new regulations, subsidiaries or rep offices of foreign entities (excluding enterprises which are approved to conduct real estate business) and foreign individuals who work or study in China, may, based on their actual needs, purchase residential properties for self-use. For cities that impose tight control on foreigners’ property buying, local legislations should apply. CBRE believes that foreign ownership restrictions in other emerging Asian markets are also expected to be relaxed progressively in the coming years as they seek to attract international capital.
For more information
on the details of individual countries in APAC, please see our full guide.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
