In the first 11 months of this year, the transaction value of commercial properties in China fell to a three-year low. Yung Ching Realty Group has attributed the decline to a move by several life insurers to focus on overseas property markets.
Yung Ching, which is one of the leading local property agencies, has released numbers indicating the transaction value of retail shops and office space nationwide for the period totaled US $ 2.49 billion, a drop of 21.5 per cent from the previous year.
The average transaction value for each month in the first 11 months of 2014 fell about 20 per cent annually.
Chinese life insurers are barred from buying commercial property with an investment return of less than 2.875 per cent. This leaves a limited supply for them to buy in the current market.
Many have decided to look overseas for investment opportunities which have the potential to provide higher returns.
The flood of investment going out of the country has affected domestic transactions and resulted in lower selling prices.
A number of property investors have also been concerned about a tax reform being pushed by the Cabinet which seeks to collect taxes baed on the amount earned by sellers as opposed to the property value assessed by the government.
Government assessed values are usually much lower than the actual market value, which means the tax burden is very low relative to a tax system based on actual gains.
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