Shanghai unveils property tax incentives
BEIJING: Shanghai announced on Monday it would be the first major Chinese city to implement tax incentives to revive its property sector, a move analysts anticipate other ‘Tier One’ city governments will quickly also adopt as distressed developers drag on growth.
This photo shows an aerial view of residential builings under construction in Nanjing, in eastern China's Jiangsu province. -- AFP.
Residents looking to sell their existing properties in the financial capital will be exempt from paying VAT so long as they hold onto it for more than two years, reports in state media said. Shanghai also raised the standard for levying deed tax to properties larger than 140 square meters (1,500 square feet), up from 90. Chinese policymakers urgently need to arrest a slump in the property market, once a key growth driver that at its peak accounted for around a quarter of economic activity. But a broader consumer and investor confidence crisis has glued shut prospective buyers’ wallets.
China’s finance ministry last week unveiled a tranche of tax incentives on home and land transactions aimed at increasing demand and easing developers’ financial difficulties. Those tax measures followed a raft of property measures announced at the end of September, including a cut in the minimum down payment ratio to 15 percent for all housing categories and a relaxation in home purchase restrictions.
“The policy pivot since September has been effective in reviving demand and supporting housing and stock prices,” said Xu Tianchen, senior economist at the Economist Intelligence Unit. “However, China’s economy is not yet on a firm footing, and policy support has to be bold and sustained to revive confidence.”
“It’s better to act sooner rather than later,” he added, pointing to the fact that Shanghai’s economy only grew 4.7 percent over the first 10 months of the year, while those of other ‘Tier One’ cities, such as Beijing and Shenzhen, topped the government’s full year growth target of about 5 percent over the same period. An index tracking China’s real estate shares .CSI931775 and an index for Hong Kong-listed mainland property developers were both trading higher on Monday. — Reuters
Shanghai will eliminate the division between so-called “ordinary” and “non-ordinary” housing when it levies value-added taxes and personal income taxes on sales, becoming the first ‘Tier One’ city to do so. “Non-ordinary” housing consists of properties of 144 square meters (1,550 square feet) and properties larger that had previously been subject to higher taxes. For the purchase of a 10 million yuan ($1.38 million) apartment, a buyer’s deed tax payment will be reduced to a minimum of 100,000 yuan from the previous maximum of 300,000 yuan, according to Yan Yuejin, analyst at E-House China Research and Development Institution. – Reuters.
