1. Expectations of real estate market after the BIG TWO CONFERENCES Presented by: Alex D. ZHANG Date: 18 th March, 2010

2. What’s the BIG TWO CONFERENCES National People's Congress (NPC) National Committee of the Chinese People's Political Consultative Conference (CPPCC) A talk between local government and central government; a talk between people and government

3. Important issues: high housing cost How to prove it’s a problem? -- 10% or 90% can’t buy the housing Bubble: Trade in high volumes at prices that are considerably at variance with intrinsic values. Intrinsic value: hard to define.

4. Market rules 2009 Shanghai Housing supply increase : Housing trading volume increase = 1 : 1.4 Speculator’s paradise

5. Bubble: yes Prick : no Big support of GDP Local government’s biggest income (income from selling land = 50% of total income) If pricked: government, banks’ crisis

6. Strategy for 2010 Maintain a steady environment of real estate market. Slight increase or decrease. Increase low-end supply, decrease high-end demand. Cool down speculation. Slow down the bubble forming or expanding

7. Detailed policies Increase low-end supply -- government provided cheap housing for low income people (?) Decrease high-end demand -- Higher mortgage interest for second housing for a person -- High tax against fast buy, fast sell -- Property tax (1% equity value per year)

8. Most effective policies (if possible) Lower the selling price of land from the local government Reduce the taxation on housing (12 taxes, 50 related fees, 62 charges for housing in total, account for 40% - 50% of the price)

9. Future expectation Two markets: -- Low end government provided markets: limited price -- High end free markets: bubble keeps growing

10. Investment hints No worry about luxury housing (villas etc.) and housing in competitive cities. (Shanghai, Beijing etc.) Do not hold too many housing under the same name. Sell low end housing (bad location, bad environment).

11. Thank you