Beijing Cuts Tax and Mortgage Rates to Boost Real Estate Market

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Oct. 23 – In a statement released on its website, the Ministry of Finance, said that starting next week it would reduce taxes on real estate and lower mortgage rates in an effort to boost the slumping housing sector.

The property deed tax will be cut to 1 percent from 3 to 5 percent for first-time homeowners or if the property is less than 90 square meters. The stamp duty and value-added tax on land sales will also be temporarily suspended.Minimum down payments for property will be reduced 20 percent from 30 percent.

“Yesterday’s measures, which mainly address first-home buyers, will only save a tiny amount of money for buyers, and as long as expectations remain that prices will fall, the wait-and- see sentiment will prevail,” said Li Wei, an economist at Standard Chartered in Shanghai, told Bloomberg News.

The ministry said in its statement that the government will speed up construction of low-rent housing and boost subsidies for low-income households. The new measures should, “improve people’s expectations about the economy, boost consumption, fuel domestic demand and promote the stable and healthy development.”

China’s real estate developers are struggling with liquidity as decreasing home sales have led to fears that a slowdown in consumption may hamper economic growth.

“This is the biggest property rescue package in China’s history, but it didn’t touch the two most critical areas that are dragging down the property market — property developers’ stressed cash flows and consumers’ expectations for further price drops,” Tao Dong, chief Asia economist at Credit Suisse in Hong Kong told Bloomberg News. “The measures won’t do the job.”

2 thoughts on “Beijing Cuts Tax and Mortgage Rates to Boost Real Estate Market

    Basti says:

    Do you know whether they rules and regulations for foreigners wishing to buy a property have been changed? As far as I know, foreigners still need to put down 100% of the price and need to have lived for five years in China before being eligible to buy housing.

    Edwin says:

    Mind that cities have different regulations!

    In Shanghai you can buy new or 2nd hand property with 40% cash and 60% mortgage. They also offered 70% mortgage this summer.
    Shanghai banks are more free in their decisions.

    Some cities (as Nanjing) take a higher cash payment of 50%. And banks put their own value on property, normally way lower than the asking price, so you can only get 50 or 60% mortgage on THEIR valuation price!

    Cheers. Edwin

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