China Property: Grey income-who benefits if the wealth gap narrows?

- "Based on the grey income research sponsored by Credit Suisse, we conclude that China will not only increase wages, but also optimise its tax system – developers that focus on mass market products and high asset turns, such as China Vanke, should stand to win."
- Grey income improved affordability, but only for the rich: "The wealth gap skews housing affordability more significantly than indicated by the official data."
- Wealth gap led to a housing mix mismatch in major cities – time to change: "In metropolitan areas such as Hong Kong, the widening wealth gap has created social issues. However, public housing took up around 45% of Hong Kong’s total housing stock, and only less than 6% in China. Therefore, we expect the government to use tax, among other things, to improve affordability, and continue to suppress investment-purpose housing demand."
- Asset turns will become more important for developers: "We expect that the pace of land price appreciation will slow in China, and that the prevailing business model of land hoarding for developers will no longer work. China Vanke, COLI, and KWG remain our top picks in the sector."

CreditSuisse China Property Policy Outlook 20100810

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