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What does a China property tax mean for students?

August 30, 2013 Leave a comment

Real estate in China is a hot topic, but I’d like to ask my students to consider a couple of narrow questions this article raises:

A combination of tax and regulatory measures is being used, and measures vary from city to city. For example, the national capital, Beijing, rolled out more purchasing restrictions in March. The city now restricts single-person households from purchasing more than one residential property. Guangzhou, in the southern province of Guangdong, is limiting growth in the prices of new properties to below the growth rate for average disposable income.

1) How do you think Guangzhou is “limiting growth in the prices of new properties to below the growth rate for average disposable income”? The article doesn’t say. What ways could the government use to accomplish this goal?

2) If the government previously did not tax property, and now starts to tax it, what unexpected or unintended effect might this have on the supply of rental apartments? What effect on rental prices?

Bonus points to students in my classes who can assess this well!

Remember: Journalists Often Know Little About Business

August 12, 2013 Leave a comment

spain-houses

Students often assume journalists for well-known media news sites must be knowledgeable about the topics they report.

They often are not. After all, many of them have degrees in journalism–not in physics, or finance, or engineering, or any of the disciplines used in most of the value-creating sectors of the economy.

Here’s a great example:

Julian Arenzon of the New York Daily news reports on a 47-story building that’s almost completed, expect for one small problem:

In what will surely go down in history as one the greatest architectural blunders, the town of Benidorm in Alicante, Spain, had almost completed its 47-story skyscraper when it realized it excluded plans for elevator shafts.

The story is almost completely wrong. There are elevators in the building. Here’s what the source that apparently broke the story said:

In January 2012, there was a new surprise: the elevator shaft had not been taken into account, as the promotional designs clearly show. “The space was calculated for a 20-storey building,” said the same sources. Then, in May, the architects directing the project resigned. They have declined to comment on the case.

That just means the the apartment space was calculated and sold without taking into account the additional space taken up by more elevator shafts when the plans changed to increase the height of the building.

Anyone with the most rudimentary knowledge of how buildings are build would know how implausible it would be for a construction firm to build a 47-story building almost to completion and then realize “no elevators!”

The moral of the story: journalists often know ridiculously little about industry of any kind, they write with childlike naivety, and easily misinterpret their sources because of this.