China launches tax policies to support property market

This photo taken with a mobile phone shows people watching a sand table model of a real estate project in east China's Shanghai, May 28, 2024. [Xinhua/Zheng Juntian]

BEIJING -- China on Wednesday rolled out tax policies to support the steady and healthy development of the real estate market, a move that analysts believe will maintain stable expectations concerning a pillar industry which underpins the country's economic growth.

The Ministry of Finance said the country will increase incentives in terms of deed tax to actively support people's essential housing needs and needs for improving their housing conditions.

The new policies, effective from Dec. 1, 2024, were jointly introduced by the Ministry of Finance, the State Tax Administration and the Ministry of Housing and Urban-Rural Development.

Individuals purchasing their only residential property or a second home, as long as the area does not exceed 140 square meters, will pay deed tax at a rate of 1 percent across the country. For properties with an area exceeding 140 square meters, the deed tax will be levied at a rate of 1.5 percent.

The revised regulation on home transaction deed tax will mainly benefit those who plan to purchase bigger homes, said Zhang Dawei, chief analyst with real estate agency Centaline Property.

Home buyers planning to buy second homes in Beijing, Shanghai, Guangzhou and Shenzhen will benefit most from the revised deed tax, as a previous rate of 3 percent had been applied to all four of these first-tier cities, Zhang said.

Under the new policy, buyers planning to buy a second home with a floor area of 140 square meters or less will enjoy a lowered deed tax of 1 percent, while for those intending to buy a second home with a floor area above 140 square meters, the revised deed tax has been lowered to 2 percent.

Regarding the new policy's impact, Zhang said that revised tax standards are expected to encourage purchase demand for both improved housing and second homes.

Given the potential for further exploration of property market policies, Zhang added that he expected more impactful policies to be continuously rolled out in the future -- which will help stabilize real estate market expectations.

The transaction volume of new homes went up 0.9 percent year on year in China in October, reversing a decline that started in June last year, while second-hand home transactions rose for the seventh consecutive month and by 8.9 percent year on year.

According to the new policies, the minimum prepayment rate for land appreciation tax will be lowered by 0.5 percentage points to alleviate the financial difficulties of real estate companies.

Additionally, authorities will clarify policies on value-added taxes and land appreciation taxes in line with the scrapping of standards for ordinary and non-ordinary housing, reduce second-hand housing transaction costs, and keep tax burdens on real estate companies stable.

The country has introduced a series of policies to beef up the economy. Since late September in particular, the central government has unveiled what experts consider a package of milestone macroeconomic measures, which focus on enhancing counter-cyclical adjustments, expanding effective domestic demand, supporting business operations, promoting property market recovery and invigorating capital markets.

Warming home sales, along with further trade improvement in October and vibrant manufacturing activity, have added to evidence proving that the Chinese economy is gaining more traction thanks to pro-growth measures.