The Chinese Ministry of Finance said it would cut taxes on home transactions as it steps up support for the property market, after the central government eased mortgage down payment requirements to the lowest level ever earlier this month.
China will set the deed tax at 1.5 percent of the home’s value for first residences bigger than 90m2 and at 1 percent for those smaller than that size, the ministry said in a statement on its Web site yesterday.
Homeowners that live in cities other than the four first-tier ones including Beijing, Shanghai and Shenzhen will also be exempt from paying a business tax on properties sold after two years of purchase. The new rules will be effective as of Monday.
In reducing the taxes, China took another step to prop up home sales as it seeks to dissolve a glut of unsold homes.
The government has pledged to reduce home inventory as one of its key tasks this year.
The area of unsold new homes nationwide had increased 12 percent from a year earlier to 441 million square meters as of Nov. 30 last year, according to the latest available data from the statistics bureau.
While the authorities’ supportive stance to the property market is known to the market, “the frequency of such measures is prompting optimism that the government will boost stimulus more strongly,” Hong Kong-based Credit Suisse Group AG analyst Du Jinsong (杜勁松) said by telephone.
The tax cuts will mostly benefit buyers of “non-ordinary” apartments, which have different definitions across cities, but typically refer to apartments larger than 144m2 with prices above the reach of many buyers, according to Liu Yuan, a Shanghai-based research director for Centaline Group (中原集團), China’s biggest property agency.
Such apartments are currently subject to as much as 3 percent of deed tax, Liu said.
“The government is encouraging people to upgrade their homes,” Liu said by telephone.
“It will be a boost to the stronger markets, but may not have too big an effect on cities where the inventories are huge,” he said, adding that down payments and taxes may be cut further.
The deed tax will be cut to 2 percent for second homes bigger than 90m2 and 1 percent for smaller residences, the statement said.
The eased deed tax requirements for second homes will exclude buyers in the four first-tier cities.
The intense loosening measures on real estate this month underlines the resolution by Chinese government to stabilize a slowing economy, Beijing-based China International Capital Corp (中金公司) analyst Ning Jingbian wrote in a note after the statement.
After six interest-rate cuts since November 2014, China on Feb. 2 said it would allow banks to cut the minimum required mortgage down payment to 20 percent from 25 percent for first-home purchases in areas without purchase restrictions, while the minimum down payment for second-home purchases was cut to 30 percent from 40 percent.
Policies in the four first-tier cities, whose home prices jumped most quickly in China, remained largely unchanged, Ning said.
New-home prices in the southern trading hub of Shenzhen jumped 47 percent in December last year from a year earlier, the latest data show.
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