The Star Online: Business
The Star Online: Business |
- China bubble concerns spread
- Thailand to cut corporate tax
- Budget measures to help enhance government delivery system
| Posted: 11 Oct 2011 05:56 PM PDT BEIJING: Concerns over a bubble in China's residential property market are spreading to the commercial real-estate sector at a time when developers are upping their exposure, and the country's insurance industry is poised to invest huge sums into the space. While commercial prices are steady and insurance companies are watching and waiting, residential property developers have increased investments in the office sector after Chinese government measures were instituted to cool home prices. Shimao Property, Country Garden, China Resources Land and Poly have been increasing their investments in commercial property. Smaller developers such as SinoOcean Land and Gemdale are increasing commercial exposure, too. Commercial real-estate investment in China will exceed one trillion yuan (US$157bil) this year, up from 740 billion yuan in 2010, as developers have shifted away from the housing market, the target of nearly two years of government measures to cool the sector. The investment frenzy into commercial property has also been fuelled by expectations of a potentially huge demand from China's insurers, which won approval late last year to invest up to 10% of their assets in real estate, most of which was aimed at commercial properties. But even before any major investment from insurance companies, prices of office space and shopping malls have jumped and rental yields have slipped due to speculative buying, fuelling concerns of a bubble forming across the industry. "The low investment yield does give us some concern that prices probably have gone up a lot and we need to see the income growth before we can see values going higher," said Michael Klibaner, head of China research for property consultancy Jones Lang LaSalle. Insurers, including China Life, Ping An, China Pacific and Goldman Sachs backed Taikang Life, have 500 billion yuan available to invest in property, based on the industry's total assets of about five trillion yuan. That's enough to buy all top-grade office buildings in Beijing, Shanghai, Guangzhou and Shenzhen, analysts say. But only a fraction of the 500 billion yuan has been invested so far, as insurers keep a tight grasp on their money, given the concerns surrounding the sector. Annual gross rental yields on commercial properties in major cities such as Beijing and Shanghai have fallen to 46% from around 10% several years ago. Commercial properties in major cities such as Beijing and Shanghai are now generating annual gross rental returns that are below China's official one-year lending rate of 6.56%. That means if investors borrow and plough that money into commercial property, they stand to lose because the returns won't even cover the borrowing cost. Last month, China's banking regulator urged banks to strictly monitor risks when they provide loans to commercial property projects and set a higher criteria for approving such loans than for home mortgages. The China Insurance Regulatory Commission (CIRC) currently requires insurers to submit all property transactions for its approval as it works on more detailed investment rules. "The risk is a bit high if insurers invest in the real-estate market now. There are good reasons for CIRC to hold back the issuance of its final guidelines," said Chen Hongxia, an analyst at Oriental Securities in Shanghai. Faced with mounting pressure to meet their long-term liabilities amid a rapidly ageing population, insurers had spent years lobbying Beijing to lift the property investment ban. Domestic investors are largely restricted from buying properties abroad due to China's closed capital account, forcing them to look for investment opportunities within the country. Investment in commercial property is encouraged by China's vow to boost domestic consumption as part of its economic rebalancing. Shirley Xiao, senior vice-president of top Chinese developer China Vanke, described the commercial property rush as irrational. Many developers lacked the financial backing and human resources needed to run office properties and malls, and China's urbanisation was far from over, boding well for the residential sector over the long term, she said. "We don't think there is logic behind this." A glut of commercial property was already plaguing cities such as Chengdu, Shenyang and Tianjin, analysts said. - Reuters Shopping malls are being built across the country, with some boasting floor areas of more than several hundred thousand sq m. The rationale behind building more malls: China has much less retail space per capita than Europe and the United States. Retail space per capita in China is less than 0.5 sq m, compared with about one sq m in Europe and 23 sq m in the United States. But some analysts say this comparison is misleading, given the sheer size of China's population. In some major Chinese cities such as Beijing and Shanghai, retail space per capita is already nearing or surpassing the European and US levels. Only large developers with easy access to bank credit and strong state parent backing, such as China Resources Land, would be successful in running large malls when there was a glut, analysts said. It is more risky for smaller developers such as SinoOcean Land and Gemdale to expand aggressively in commercial property, which requires more expertise and is more capital intensive and time consuming. And as more people shop online, it is getting increasingly challenging to run a shopping mall and make it appealing to merchants, consumers and investors. "I think it will be a golden decade for the consumer Whether it will be a golden decade for developers remains to be seen," said James Hawkey, executive director of retail services at Cushman & Wakefield in China. - Reuters Full content generated by Get Full RSS. |
| Posted: 11 Oct 2011 05:53 PM PDT Wednesday October 12, 2011BANGKOK: Thailand's cabinet has approved corporate tax cuts starting from next year, according to Deputy Finance Minister Boonsong Teriyaphirom. Corporate tax would be cut to 23% from 30% in 2012, then to 20% in 2013, Boonsong said in a statement after a weekly cabinet meeting yesterday. The tax cuts were promised by the Puea Thai party, which now leads the government. Reuters |
| Budget measures to help enhance government delivery system Posted: 11 Oct 2011 05:50 PM PDT AS the implementation of Government Transformation Programme gains momentum, I noted in the just unveiled Budget 2012 several transformational proposals to our tax administration system. l Compensation for late refund For years, taxpayers have grumbled about penalties of 15% imposed on late payment of taxes that are not matched by any compensation when tax refunds are delayed. Finally, the Government has committed to accord some compensation to taxpayers for late refunds of tax overpaid. With effect from year of assessment 2013, 2% compensation is to be paid on a daily basis starting from the first day after 90 days from the e-filing deadline or 120 days for manual filing. The 2% interest compensation appears low compared with the prevailing borrowing rates of 5% to 8% businesses usually incur. New Zealand offers a more generous compensation benchmarked to bank loan interest rates and is chargeable from the day after the filing deadline. In any case, this compensation will provide the tax administration with a measure of their efficiency. However, this proposal is a double-edged sword as any tax over-refunded due to an incorrect return may be subject to 10% penalty. Time bar The six-year time bar for raising additional assessment will be shortened to five years from year of assessment 2013. It can be painful to retrieve old records and to provide explanations regarding transactions that took place years ago. This prolongs the tax audit procedure, contributing to inefficiency of both the taxpayer and the tax authority. Shortening the time bar would create a sense of urgency on the part of the authority to carry out tax audits. In spite of the shorter time bar, the taxpayer has to keep records for seven years. If the timeframe for record-keeping can be correspondingly shortened, it will further reduce the cost of doing business. Singapore, for instance, has a four-year time bar and a five-year record-keeping regime. Mobile e-filing and pre-filling E-filing will soon be extended to submissions from mobile devices. This may especially appeal to the younger generation and the highly mobile taxpayers. Pre-filling some information in the tax return by the Inland Revenue Board (IRB) will ease the tax filing process, but the employer is burdened with extra responsibility of providing the authorities with their employees' tax information. Pertinent tax information like total income, Employees Providend Fund (EPF) contributions and monthly tax deductions are currently available in the EA form prepared by employers. Perhaps the said form can be enhanced and linked to the IRB's IT platform. This will further promote a paperless and environment-friendly economy. The above measures would contribute considerably towards enhancing the government delivery system and augur well for the nation's competitiveness, which has risen five rungs to 21st in the World Economic Forum's Global Competitiveness Index ranking 2011. |
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