Capital Gains Tax

Shanghai property transactions hit 3-year high new despite curbs

Total value of transactions in the city last month hit 1.54 million square metres – a 180pc quarterly increase and the highest level since December 2009

PUBLISHED : Tuesday, 02 April, 2013, 12:39pm
UPDATED : Wednesday, 03 April, 2013, 2:16am

The volume of Shanghai flat transactions hit a 40-month high in March, as speculators raced to get ahead of new property market cooling measures announced by the central government, Caixin Online reported on Monday.

The total value of transactions in the city last month hit 1.54 million square metres (16.5m square feet), according to real estate services company E-House China, a 180 per cent quarterly increase and the highest level on record since December 2009.

Shanghai and Beijing moved on Saturday to introduce a 20 per cent capital gains tax on second-hand property transactions in a bid to tame overheating property markets.

Four more cities – Shenzhen, Tianjin, Jinan and Hefei – are also set to meet a central government deadline for issuing property cooling measures.

Other measures Shanghai has implemented include a halt on loans to residents who own more than one flat and are looking to buy another, bigger down payments for second-home buyers and "greater scrutiny" to foreign or divorced borrowers looking to buy homes in the city.

Analyst Tang Zhengwei of SouFun Holdings, China’s biggest real estate website operator, said the announcement of 20 per cent profits tax focused on tackling prices in the secondary market, but in future more buyers would switch to the new home market.

On the supply side, March figures also hit new record highs at 1.33 million square metres, a 6 per cent increase from the month before and the highest volume for a single month since January 2011. The average transaction price for Shanghai flats was 22,900 yuan (HK$28,700) per square metre.

The State Council, China’s cabinet, announced the proposed 20 per cent profits tax on second-hand home transactions on March 1, which hit property stocks hard and triggered panic in the property market. Local governments were given a month to say how they would implement measures.

Chinese home prices across 100 major cities grew 3.9 per cent year-on-year to an average 9,998 yuan (HK$12,356) per square metre, according to figures released by the China Index Academy on Monday, marking the fourth consecutive monthly increase.

Xu Xiaonan, an economist at the Shanghai-based China Europe International Business School said the government had no “legal basis” or economic rationale intervening in the property market and that doing so would only incite more chaos.

“It’s not only the property market that has become unstable, the social order has also become unstable, because of the issue of housing,” said Xu, speaking at the Second Lingnan Lecture series at Guangzhou's Sun Yat-sen University on Sunday. “To establish order in the [property] market we must first restrain government meddling.”