Nowadays the term “asset restriction” has become a very popular term in the field of money management. Countries across Asia such as China, Indonesia, Hong Kong and Singapore have imposed asset restrictions in recent years. Property restrictions can be defined as property policies implemented by governments to prevent excessive rise in real estate prices. Asset sanctions are also called asset freeze or freezing measures. Policies generally target the residential sector. Excessive growth in house prices can lead to asset bubbles and make housing costs very expensive and out of reach for a large portion of the population. When an asset bubble bursts, it usually has far-reaching consequences for the economy. This is because the relationship between the banking sector and the real estate sector is usually strong in the form of mortgage loans to home buyers and project loans or construction loans to developers.
Proprietary restriction measures can be demand-side measures or supply-side measures. Demand-side measures aim to reduce speculative/investment demand to control prices. Some measures include: 1) reducing the availability of financing, 2) increasing the cost of loans, 3) increasing upfront payments on loans, 4) increasing taxes such as wealth tax or capital gains tax, and 4) reducing eligibility. Tightening the criteria for purchasing a home. The availability of financing may be tightened by not providing loans/mortgages for the purchase of a second or third home. Additionally, even if the loan is approved, the down payment may be high and the interest rates may be high. For example, the minimum down payment on a first home mortgage in China is 30%, while the minimum down payment on a home mortgage is 60% (70% in first-tier cities such as Beijing). Increase in capital gains tax impacts the domestic used/secondary market and curbs speculative demand. One form of excessive restriction is to prevent an entire segment of the population from purchasing real estate. Non-local residents (within a particular city or country) may be restricted from purchasing real estate. In October 2012, Hong Kong imposed a 15% tax on real estate purchases made by foreigners. Supply-side measures aim to increase the supply of houses to control price rises. Some of these measures are: 1) increasing land supply/availability for real estate development, 2) government developing affordable homes for low-income residents, and 3) land hoarding (keeping land idle for too long). Imposition of heavy fine/penalty. ,
The question is whether asset restrictions are effective. China implemented a real estate ban in 2010 and has so far been spared from the real estate market downturn. Hong Kong implemented restrictions in 2012, while Singapore and Indonesia implemented them in 2013. When price increases are caused by a shortage of land and housing, such as in Hong Kong, demand-side policies may not be effective unless there are more stringent policies such as blocking some residents from purchasing homes. Compared to demand-side measures, supply-side measures take longer to have any impact on real estate markets. Assets act as investment or storage of wealth when household savings rates are high, deposit rates are low and investment channels are lacking. In such a scenario, measures to tighten the mortgage market may not have much impact, as home buyers finance their purchases with their savings and do not rely on mortgages. Other measures such as allowing alternative investment options can divert investment away from assets and control investment demand.
The real estate asset class provides investment opportunities for investors. However, investors should take advice financial advisor To better understand the regulatory environment in different markets, assess the various risks associated with them and invest accordingly.
