Sunday, February 27, 2005

a little bit abt property market..

I am not into property brokering or etc.. but having read an article somehow boosted my knowledge on this area.

It was an article from Sunday Morning Post (Hong Kong Edition).. where it is titled " New rules force asset shakeout".- Japan

Here are the main points.
1. Beginning April 1, asset-impairment accounting will become mandatory for corporations. According to some analyst, it is the nudge necessary to sort out lingering asset-price deflation.
2. As consequence, many companies have started to dispose of property to lighten their balance sheet, stimulating major foreign-investor and real-estate investment trust interest in the market.

My understanding is this..
Many corporation refused to declare assets owned in the balance sheet because if they do that, they have to deflat it(if they have to). Thus, this would make it(property) officially cheaper. Because how can you tell a property selling price is justify ? has to be some documents from the owner..How property analyst got information is also via all those published balance sheets.

As consequences, many corporations opted to sell off properties which are not favorable to them, fearing that it might lose more value as years go by. Contradictory, property is not supposed to lose value as long as there is no earthquake happening to that location (the key to property business).. perhaps in Japan it is different, where changes to price are more volatile.

As a result of large properties being shakeout, supply increases and thus depreciation of the market happens. This in turn, attracted foreign funds as well as more actvities for the REIT(real estate investment fund).

The analyst indiectly implying that this move is engineered by government to deliberately bring in more funds to the country as well as improve liquidity.

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