Shanghai will reduce real estate transaction taxes to boost demand, state media says (updated)

Weibo

18/11/2024 05:56

* 
      Shanghai to reduce some taxes on real estate transactions
    

        * 
      Markets cheer move, but many social media users not
impressed
    

        * 
      Lowering transaction costs will not provide sustainable
market
boost -economist
    

  
 (Adds details, background)
    By Liangping Gao and Joe Cash
       BEIJING, Nov 18 (Reuters) - Shanghai said on Monday it
would reduce some taxes on real estate transactions from Dec. 1,
according to state media, a move designed to support the
property market in China's second-largest city.
    China has been aiming to bolster the crisis-hit property
market by increasing demand and easing developers' financial
difficulties, with its finance ministry last week unveiling tax
incentives on home and land transactions.
    An index tracking China's real estate shares  .CSI931775 
and an index for Hong Kong-listed mainland property developers
 .HSMPI  were both trading higher on Monday. 
    Shanghai will eliminate the division between so-called
"ordinary" and "non-ordinary" housing when it levies value-added
taxes and personal income taxes on sales. "Non-ordinary" housing
consists of properties of 144 square metres (1,550 square feet)
and larger that had previously been subject to higher taxes.
    Residents will be exempt from VAT when they buy a property
and hold on to it for two years or more before selling it,
according to state media. 
    Shanghai also raised the standard for levying deed tax to
properties larger than 140 square metres from the previous 90
square metres.
    For the purchase of a 10 million yuan ($1.38 million)
apartment, a buyer's deed tax payment will be reduced to a
minimum of 100,000 yuan from the previous maximum of 300,000
yuan, according to Yan Yuejin, analyst at E-House China Research
and Development Institution.
    The city's authorities stepped up efforts to support real
estate this year after the central government announced a series
of supportive policies including interest rate cuts and
down-payment reductions, but demand remained lacklustre.
        Resale home prices in the city fell for the 16th
consecutive month in October, down 6.7% from a year earlier,
though there was a slight month-on-month increase in prices for
new homes, according to official data released on Friday.
        "Shanghai's recent move is a continuation of these
nationwide policies, all designed to restore confidence and
rejuvenate sentiment in the housing sector," said Bruce Pang,
chief economist at JLL, a property consultancy company. 
        "We anticipate that more cities will unveil similar
incentives in the coming weeks," Pang said.
        The relaxation of Shanghai's tax policies was ranked as
the second most-read topic on Chinese social media platform
Weibo, with over 800,000 readers. 
        Many Weibo users were not impressed with the changes.
        "(Shanghai's property prices) won't fall any further to
the extent that a working man can afford it," one commenter
said, while another user said "even with more stimulus, the
property market is expected to be difficult to get up in a short
term".
        JLL's Pang said merely lowering transaction costs would
not provide a sustainable boost for the housing market.
    "To reignite the growth engine of the property sector,
policymakers must address residents' expectations regarding
economic and income growth, and offer a more stable outlook on
housing prices," Pang added.
($1 = 7.2366 Chinese yuan renminbi)

 (Reporting by Liangping Gao and Joe Cash; Editing by Sonali
Paul and Jamie Freed)
 ((gao.liangping@thomsonreuters.com;))