Shanghai

Shanghai secondary sales set for record high in rush to beat levies

PUBLISHED : Wednesday, 27 March, 2013, 12:00am
UPDATED : Wednesday, 27 March, 2013, 5:44am
 

Sales of secondary homes in Shanghai may hit a record high this month as sellers rush to avoid having to pay the 20 per cent capital gains tax flagged by the government earlier this month.

Clement Luk Shing, chief executive of property agent Centaline's eastern and northeastern operations, expects sales of second-hand homes in Shanghai to exceed 40,000 in March - double the average monthly figure of some 20,000 in peak months such as December and January.

"Everyone is worried about having to pay the tax. Although it targets sellers, they may try to pass it on to buyers," Luk said.

Since the government's announced the tax, there has been a rush by sellers and buyers to complete deals under negotiation, he added.

On March 1, the State Council issued guidelines instructing local governments to strictly follow all policy guidelines introduced to cool the property market. It includes levying a capital gains tax at a rate of 20 per cent, first announced in 1994 but never strictly enforced.

Only Guangzhou has so far released more details in response to the State Council order. It said it would immediately impose the tax only in places where home prices rise too rapidly. Other local governments have yet to announce when they will start levying the tax.

Shanghai native Zhou Yan and her boyfriend were among those who rushed to beat the tax. They bought a second-hand flat near Hongqiao two weeks ago because they feared flats would become less affordable once the tax was levied.

"If sellers seek to pass the tax on to buyers it will mean we would have to pay an extra 600,000 yuan [HK$742,000] for an apartment priced at 3 million yuan. That's a lot." Zhou said.

Once the tax is imposed, secondary flat sales would likely fall, said agents, and buyers might turn to the new-home market, to which the tax does not apply.

Hong Kong tycoon Li Ka-shing's Cheung Kong (Holdings) is planning to sell more than 700 executive suites of between 105 and 355 square metres in size, at its Upper West Shanghai project in Zhenru district at around 35,000 yuan per square metre.

William Kwok Tze-wai, Cheung Kong's real estate director, said the sales would not be affected by the latest measures because the suites were not defined as residential properties.

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