China likely to ease sales tax on existing homes

(chinadaily.com.cn) Updated: 2014-10-20 16:00

BEIJING -- Chinese authorities are likely to relax the sales tax on existing homes, the Beijing-based China Securities Journal reported on Monday in a front-page story.

Under the new policy, sales of a second home purchased no less than two years prior will be exempt from a 5-percent tax on the transaction price, said the daily, citing well-placed sources.

According to the newspaper, think tanks have proposed relaxation of sales tax to buoy home sales in industry research reports submitted to government departments.

Currently, the taxable period is five years from date of purchase. The current policy has been in place since early 2011, when the Chinese government adopted a package of policies aimed at curbing the overheated housing market.

The report also said regulating authorities had concluded that China's housing market is oversupplied based on surveys and research.

Aside from the sales tax, authorities might make more changes on transaction taxes in the future, if necessary, to lower transaction costs and boost home sales, according to the report.

Since the beginning of 2014, the Chinese property market has suffered a notable downturn, with falling prices and sluggish sales. Official data showed that out of 70 major Chinese cities, new homes in 68 saw month-on-month price declines in August, compared with 64 in July.

On Sept 30, China unveiled eased mortgage measures for home buyers in a joint announcement by the People's Bank of China (PBOC), the central bank, and the China Banking Regulatory Commission.

According to the announcement, mortgages on a second home will be treated as a first mortgage if the buyer has no other outstanding mortgages. As a result, people who wish to buy a second home will enjoy the same 30-percent down-payment required of first-time home buyers, instead of a 60 to 70 percent down-payment.

Second-home buyers without outstanding mortgages will also be allowed interest rates as low as 70 percent of the 6.55-percent benchmark mortgage rate, rather than paying a 10-percent premium on top of the benchmark rate as required previously.

Before the easing of mortgage rules, 41 out of an original 46 cities removed home purchase restrictions amid a cooling market.

Only five cities still impose home purchase restrictions, namely Sanya on Hainan Island and the country's four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen.