City home buyers get a tax boost
Print Edition
CHINA will cut deed and business taxes for home purchases in most cities in an attempt to shore up the country’s sagging property market, according to an official announcement yesterday.
From Monday, buyers in the four gateway cities of Shanghai, Beijing, Guangzhou and Shenzhen will be eligible for a 1 percent rate in the “deed tax” when they purchase a house no larger than 90 square meters, or a 1.5 percent rate if the home is larger, according to a statement issued by the Ministry of Finance, the State Administration of Taxation and the Ministry of Housing and Urban-Rural Development.
To qualify for the preferential rate, the house must be the only property owned by the household.
In Shanghai, at present, the tax rates are 1 percent and 3 percent depending on the size or location of the property.
Buyers in smaller cities will also be eligible for a 1 percent rate on purchases of a second home no larger than 90 square meters, or a 2 percent rate if the second house is larger.
They will also be eligible for a waiver of business tax if the property is owned for longer than two years, according to the statement.
“The latest series of measures, all aimed to drive property sales by cutting home purchase cost, will be effective in boosting buyers’ momentum mainly in lower-tier cities,” said Lu Wenxi, a manager at Shanghai Centaline Property Consultants Ltd, “while they might just leave a limited, or psychologically positive impact on home purchasers in first-tier cities like Shanghai.”
Lu said the official announcement was timely as the housing market usually picked up in March and April after the end of the Spring Festival holiday.
China’s property sector took a downturn in 2014 due to weak demand and over-supply.
Sales and prices are falling and investment is slowing in many cities, which has affected sectors ranging from cement to home appliances, Xinhua news agency reported.
The country has made de-stocking the property inventory one of this year’s major economic tasks, as an ailing housing market could derail the economy, which is growing at the slowest rate in a quarter of a century.
Central and local governments have been making continuous efforts to try to reduce the huge number of unsold properties, particularly in smaller cities where supply has greatly outstripped demand.
Earlier this month, the People’s Bank of China cut the minimum deposit for first-home buyers in smaller cities from 25 percent to 20 percent while the down payment for second-home buyers was cut to 30 percent from 40 percent.
Lu Qilin, director of research at Shanghai Homelink Real Estate Agency Co, expected a limited impact on housing markets in gateway cities.
“Home buyers in Shanghai will be able to enjoy a maximum rate cut of 2 percentage points in deed tax which is of course a good thing,” he said. “However, taking consideration of the extremely high cost of homes in the city, it could be like the tip of an iceberg.”
In Shanghai, the average selling price of new residential properties rose 31 percent from 2014 to 21,500 yuan (US$3,270) per square meter last year, according to the city’s statistics bureau.
The average cost inside the Inner Ring Road jumped 34.4 percent to 72,066 yuan per square meter, while for those outside the Outer Ring Road, prices rose 19.6 percent to 16,065 yuan.
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