【Epoch Times News, November 14, 2024】 Following a series of so-called major measures by the Chinese Communist Party (CCP) to rescue the real estate market, on November 13, the CCP once again introduced tax preferential policies for housing and land transactions, attempting to salvage the highly damaged property market. Analysts from mainland China dissect the true purpose behind the CCP’s unveiling of these “new policies,” pointing out that the new policies reveal the CCP’s fear of property owners selling off properties in large quantities to drive down prices.
According to an announcement published on the CCP government’s website, starting from December 1, the Ministry of Housing and Urban-Rural Development will expand the scope of residential properties subject to a 1% deed tax from the previous limit of 90 square meters to properties below 140 square meters and clarify that Beijing, Shanghai, Guangzhou, and Shenzhen can uniformly apply preferential deed tax policies for second homes across all regions.
Following the adjustment, nationwide, individuals purchasing the sole family residence and the second family residence with an area not exceeding 140 square meters will uniformly pay a deed tax rate of 1%; regarding the land value added tax, the minimum pre-collection rate in various regions will be uniformly reduced by 0.5 percentage points.
The announcement indicated that in terms of the value-added tax, following the cancellation of standards for ordinary and non-ordinary residential properties in relevant cities, individuals selling residences owned for two years or more (including two years) will be exempt from the value-added tax. The corresponding provisions for imposing value-added tax on individuals selling non-ordinary residences owned for two years or more in Beijing, Shanghai, Guangzhou, and Shenzhen will be appropriately suspended. In terms of land value added tax, for cities with canceled standards for ordinary and non-ordinary residential properties, the preferential policy of exempting land value added tax will continue to apply to taxpayers who construct and sell standard residential properties where the value added does not exceed 20% of the deducted amount.
David, certified as the General Manager of Guangdong Kangyu Technology Co., Ltd., stated that the CCP government’s introduction of the aforementioned policies aims to support the real estate market.
Since the end of September, the CCP government has implemented a series of relaxed real estate measures, including lowering the minimum down payment ratio for all types of housing to 15% and relaxing restrictions on home purchases.
David remarked that the various favorable policies for the real estate market since the end of September have not been effective, and the market is getting colder. Despite some online hype suggesting “the real estate market is about to turn around, everyone hurry up and buy houses,” in reality, the new policies introduced by the authorities are only trying to extend the hype. “I don’t believe that adjusting deed tax and value-added tax is to alleviate the burden on homebuyers; the main purpose is for the government to support the real estate market.”
He explained that on the surface, the propaganda states that the cost of buying a house is reduced by lowering the deed tax, which is not true. The adjustment of deed tax is actually an adjustment of the area—previously limited to 90 square meters, it is now adjusted to 140 square meters. To reduce the cost of buying a house, the deed tax collection range should be adjusted rather than the size of the property.
“It is just changing from 90 square meters to 140 square meters. The deed tax for 90 square meters is 1%, and for 140 square meters, it is also 1%. The government actually aims to encourage people to buy larger houses (140 square meters), making you pay more money and leverage more. This is their ultimate goal, not to help you save money.”
Regarding the value-added tax, David noted that the new policy cancels the value-added tax for ordinary and non-ordinary residential properties and for individuals selling homes owned for two years or more; in Beijing, Shanghai, Guangzhou, and Shenzhen, individuals selling homes owned for two years or more will be exempt from the value-added tax. The so-called non-ordinary residential properties refer to luxury houses, and the new policy is a loosening of regulations for luxury homes. The government’s intention is very clear, indicating the real estate markets of these top-tier cities are relatively sluggish.
David analyzed further that the reason for canceling the value-added tax for properties sold after two years is to encourage property owners not to sell. Selling within two years will result in taxation. The main aim of the authorities is to have homeowners hold onto their properties, not to sell or drive down prices.
Data from the People’s Bank of China shows that in October 2024, medium and long-term loans amounted to 110 billion, compared to 230 billion in September.
David explained that medium and long-term loans are mortgage loans for buying houses. The central bank’s data proves that house mortgage loans in October this year were more than halved compared to September. This data is very poor. Therefore, the market in October has been very cold and extremely cold. The real estate market is very cold now. If a major move is not made soon, there will be a cliff-like decline.
Well-known blogger “Follow Me North” with 1.07 million followers cautioned that attention should be paid to the fact that the new policies will be implemented from December 1, 2024. However, many new real estate policies have been introduced by the authorities from September to October, and existing homeowners who have successfully transacted in the second-hand market and paid the deed tax during this period will not benefit from the new policy.
He mentioned that concerning the value-added tax, there is no exemption for individuals selling homes purchased within the past two years. The authorities have two intentions: they are concerned about speculators looking to profit quickly; in recent times, many people are eager to list properties for sale immediately after moving out. Therefore, the government aims to control such practices to prevent widespread listings and sales, leading to a chaotic situation.
Regarding the impact of the government’s policy of reducing property deed tax on the mainland real estate market, “Follow Me North” believed there would be no significant effect.
“People who intended to buy a house would not be deterred by a few thousand yuan in tax; those who did not plan to buy a house would still refrain because saving a few thousand yuan would not prompt them to purchase a million-dollar property. Therefore, the overall downward trend in the real estate market remains unchanged,” he commented.
Many mainland netizens are also skeptical of the new policies implemented by the authorities.
“Lucky Singapore”: Those who wanted to buy have done so early; those who cannot afford it, even with reduced deed tax, still won’t buy!
“Occupation Supporting the Land”: I don’t lack the deed tax; I lack the down payment.
“Elegant Sea Breeze n”: Even if it’s tax-free, I still can’t afford it.
“Nostalgia for the Year of the Ox”: Lowering interest rates and taxes are all minor aspects; why not lower property prices?
“Amusing Cake we3”: With so many favorable policies, it proves that the real estate market is completely inadequate!
“Not Just an Embroidered Jin Yi Wei with Embroidered Spring Knives”: All policies that do not aim to lower property prices are nothing more than a hoax!
English Zé, certified as a television presenter and first-class announcer in Jiangsu, stated that the transition is happening too quickly. The current policies indicate that the government hopes to gradually increase the transaction volume in the real estate market. However, there is a more practical issue here: most people who currently own properties are essentially stuck. For instance, if I wanted to trade up, but my current property cannot be sold, then I don’t have enough funds. I can only consider upgrading to a better and larger house once I manage to sell my current property. That’s the problem.
“Everyone wants to live in a slightly bigger house. Every day I think about it, as I record videos, the background of my house is truly not up to standard for everyone. Nevertheless, my house is what it is, and I can’t renovate it. Thinking of getting a bigger house, especially setting up a dedicated studio for live streaming or video recording, poses significant challenges and requires substantial investments,” he expressed.
He mentioned that there are multiple forecasts, including reports from various foreign media outlets, suggesting that property prices might drop until 2027. “So, I can only wait until that time to consider changing houses.”