China is planning to cut taxes for home purchases as the government dials up fiscal support to revive a moribund housing market, people familiar with the matter said.
Regulators are working on a proposal that would allow mega cities including Shanghai and Beijing to cut the deed tax for buyers to as low as 1 percent from as much as 3 percent, the people said.
City governments have leeway to tweak the rules, they added.
Photo: Reuters
The plan, hinted at on Friday by Chinese Minister of Finance Lan Foan (藍佛安), underscores Beijing’s increased willingness to use fiscal tools to shore up the sluggish economy along with monetary easing.
Under the latest proposal, top-tier cities are expected to be allowed to scrap the distinction between ordinary and luxury homes, which would substantially lower purchasing costs for people seeking to upgrade their residences, people familiar with the matter said.
In Shanghai for example, apartments bigger than 144m2 are considered “non-ordinary.”
If realized, the move would help reduce cost of home buying and boost property sales, said Raymond Cheng (鄭懷武), head of China property research at CGS International Securities Hong Kong Ltd (銀河證券).
A years-long property crash has wiped out billions of dollars in household wealth, adding to deflationary pressures. Economists are calling for more fiscal support to ensure China’s about 5 percent economic growth target is met this year.
The property deed tax cut is consistent with earlier expectations that the government would issue fiscal policies helping the property sector, Morningstar Inc analyst Jeff Zhang said.
The plan to cut property taxes is set to reignite investors’ expectations for large-scale stimulus to boost domestic demand and combat deflation after last week’s high-profile legislative meeting fell short of market forecasts.
China in the past two months unleashed its strongest package of policies to boost the property market, including cutting borrowing costs on existing mortgages, relaxing buying curbs in big cities and easing down payment requirements.
Last month, residential property sales rose for the first time this year, suggesting that support measures were helping to inject some confidence in buyers. That said, the recovery was lopsided, with state developers benefiting the most from the stimulus and buyers preferring existing homes.
The country also pledged last month to nearly double the loan quota for unfinished residential projects to 4 trillion yuan (US$552.87 billion). The announcement underwhelmed due to a lack of concrete numbers for special bonds to enable local governments to digest about 60 million unsold units.
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