China to lower annual property tax as part of effort to boost housing sales
Beijing and Shanghai will be exempted from the measures designed to spur home purchases
China will lower property taxes from Monday in an effort to spur demand in an oversupplied housing market.
The latest measure comes just two weeks after China’s central bank said is would reduce the minimum down payment for first-time homebuyers to 20 per cent in most cities, the lowest level since 2008.
In the latest action, the Ministry of Finance said on Friday that buyers of homes for use as their primary or secondary home the deed tax rate will be reduced to 1 per cent. The tax cut will only apply to home under 90 square metres. For larger homes, the annual deed tax rate is 1.5 per cent for first home and 2 per cent for second home.
Most of the tax adjustment will not apply to Beijing and Shanghai where home prices remain elevated.
“This will bring direct benefits to home buyers,” said Long Bin, Chief Marketing Research Analyst at property consultancy Hopefluent.“Especially for those budget conscious first-time buyers.”
Long said the measures will have a positive effect on the market when taken in context as a package of other recent policy support to the housing market.
David Hong, head of research at China Real Estate Information Corp said the tax cut will mostly benefit those who want to buy larger homes, as in most cities, buyers already enjoy reduced tax rate for homes under 90 square meters.
Earlier this week, the PBOC said it would raise the deposit rates for its housing provident fund, attracting more funds into the government-subsidised lending facility. The fund acts a saving programme that enable employees and employers to set aside part of their monthly wages for use as mortgage deposits.
The Chinese government has sped up measures to prop up the housing market amid a weakened economy. President Xi Jinping said he would redouble efforts to reduce unsold homes across China, especially in smaller cities glutted with oversupply.
More than fifty local city governments have already started providing purchase subsidies to homebuyers, and more easing policies are expected to be rolled out after the annual session of National People’s Congress (NPC) next month, including a further cut to interest rates and banks’ reserve requirement ratios.
“There will be increasing policy support to the property market this year to reduce inventory and stimulate the property investment,” Long said.
China’s property investment growth slowed to 1 per cent last year, the weakest since 1998.