China is working to change its tax structure on residential real estate transactions. They do this to reduce the cost of ownership and to try to extend new incentives to more buyers. These are some steps taken by the country’s government to end a four-year-old crisis, according to a detailed report by the South China Morning Post.

Advantages for first-time buyers from December 1st

First-time buyers will benefit from a 1 percent deeds tax on homes measuring 140 m² (1,507 square feet) and below from December 1, the Finance Ministry said on Wednesday, while a rate of 1.5 percent will be imposed on the purchase of units. above this size. The current threshold is 90 m², while for purchases of second homes, a 2% deed tax will only hit transactions involving units from 140 m² instead of 90 m², he said. he added, explains the South China Morning Post report in more detail.

The new structure will be standardized nationwide, the relevant ministry said, implying that rates in first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen will increase from 3 percent for transactions involving larger units and the purchase of second homes.

Opinions of Vice President of E-House China Real Estate Research Institute

“This is a fairly important measure that will directly stimulate demand for medium and large-sized housing, especially those larger than 90 m², by reducing transaction costs,” said Yan Yuejin, vice president of E-House China Real Estate, based in Shanghai. Research Institute. Rates will be more aligned nationally, further supporting the market’s recovery, he added, as the South China Morning Post report explains.

The plans to boost real estate transactions follow calls in recent months by regional authorities to remove distinctions between standard and atypical housing. In mainland China, houses measuring at least 144 m² are considered above average and non-standard, explains the South China Morning Post.

At the end of September, the Chinese administration introduced these corrective measures to save the country’s real estate and stock markets. The overall objective was to revive the economy, after the first setbacks linked to temporary measures since the end of the Covid-19 pandemic.

It is also crucial to note that China’s economy grew 4.6 percent in the third quarter, compared to 4.7 percent in the previous three months, below the official annual target of 5 percent. , according to official figures.

There remains the possibility of obtaining more incentives

More incentives are expected, according to Jeff Zhang, a Hong Kong-based equity analyst at US research firm Morningstar. Home sellers can expect the removal of a 5 percent value-added tax on properties sold within two years, he said, while a potential tax cut on personal income could further stimulate overall consumption.

In another initiative to support homebuyers, the government in southern tech hub Shenzhen is considering providing larger loans to support homebuyers. It plans to increase the housing provident fund loan limit for individuals from 500,000 yuan to 600,000 yuan. The limit for households could be increased from 900,000 to 1.1 million yuan.

Therefore, as things develop, global market participants and investors will carefully follow the development of the Chinese real estate market crisis. Because these developments, along with government support, will define the trajectory of the Chinese economy.