China cuts taxes for home purchases in fiscal policy support
CHINA is cutting taxes for home purchases, as the government tries to put a floor under falling prices and sustain an improvement in housing transactions.
The nation cut home purchase deed taxes to 1 per cent for first- and second-house buyers of flats of 140 square metres and below, from a current level of as much as 3 per cent, according to a joint statement on Wednesday (Nov 13) by the Ministry of Finance, State Taxation Administration and Ministry of Housing and Urban-Rural Development.
That paves way for reduced costs for property purchases in mega cities including Beijing and Shanghai. The new policy will be effective from December.
The plan came after Finance Minister Lan Fo’an expressed Beijing’s increased willingness to use fiscal tools to shore up the sluggish economy along with monetary easing. Lan pledged to carry out “more forceful” fiscal policies next year after unveiling a 10 trillion yuan (S$1.9 trillion) debt swap for local governments, signalling bolder steps could come after US President-elect Donald Trump takes office.
China will also allow the biggest cities to scrap the distinction between ordinary and luxury homes, which would substantially lower purchasing costs for people seeking to upgrade their residences.
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- Deed tax cut to 1 per cent for buyers of first and second homes that are 140 square metres or smaller
- Deed tax cut to 1.5 per cent for first-time buyers of flats larger than 140 square metres; 2 per cent for buyers of second homes of that size
- Scraps distinction between ordinary and non-ordinary homes for value-added taxes in China’s largest cities including Beijing, Shanghai, Guangzhou and Shenzhen
- Eliminates value-added taxes for homes owned for two years or more
China first mentioned its plan to rid such distinctions following the Third Plenum in July. Municipal governments in Beijing and Shanghai in September flagged they would make such changes “at an appropriate time,” but neither has implemented it.
The nation’s domestic demand has stayed subdued despite Beijing’s stimulus measures since late September that included interest-rate cuts, more cash for bank lending and support for stocks and property markets. Economists are calling for more fiscal support to ensure China’s roughly 5 per cent economic growth target is met this year. Last month, President Xi Jinping reiterated the need to hit that goal.
In the past two months, China unleashed its strongest package of policies yet to boost the real estate market, including cutting borrowing costs on existing mortgages, relaxing buying curbs in big cities and easing downpayment requirements.
Residential property sales rose for the first time this year in October, suggesting that support measures are helping inject some confidence in buyers. That said, the recovery is lopsided, with state developers benefiting the most from the stimulus and buyers preferring existing homes. BLOOMBERG
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