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Wednesday, 17 December 2008
China Cuts Home-Sales Tax as Property Slump Deepens Slowdown
China will reduce a tax on home sales to stem a property-market slump that may drive the world’s fourth-biggest economy into the deepest slowdown since 1990.
China Cuts Home-Sales Tax as Property Slump Deepens Slowdown
By Eugene Tang and Luo Jun 17 December 2008
(Bloomberg) – China will reduce a tax on home sales to stem a property-market slump that may drive the world’s fourth-biggest economy into the deepest slowdown since 1990.
Sale profits, rather than prices, will now be taxed, the State Council said in a statement on a government Web site.
The measures “are much more significant than those announced in the past few months” and, with interest-rate cuts, are likely to stabilize the property market, said Peng Wensheng, head of China research at Barclays Capital in Hong Kong.
Falling home sales are undermining construction and domestic consumption just as export demand collapses because of recessions in the U.S., Europe and Japan. Building is the biggest driver for China’s expansion, contributing a quarter of fixed-asset investment and employing 77 million people.
The levy will be waived on properties sold two years after purchase, down from five years, the State Council said. The new rules apply for one year, it added, without saying when they take effect.
China’s economy may grow as little as 5.5 percent next year, the weakest pace since 1990, according to CLSA Asia Pacific Markets. That’s less than the 8 percent needed to create jobs and maintain social stability, according to China Banking Regulatory Commission Chairman Liu Mingkang.
The government will expand preferential lending rates for second-home buyers, the statement said. It called for more lending for low-cost housing projects and support for mergers and acquisitions by developers.
First-Home Buyers
Previous measures this year have included trimming costs including mortgage rates, taxes and down-payments, for first- home buyers.
After the statement was published, the central bank issued new rules for lending to developers of low-cost housing.
Home sales fell 20.6 percent in the first 11 months of 2008 from a year earlier, according to the statistics bureau.
Shanghai house prices fell 19.5 percent in the third quarter from the previous three months, according to real estate broker Savills Plc. Construction will contract 30 percent next year after expanding 9 percent in the first three quarters of 2008, according to Macquarie Securities.
The government last month cut interest rates by the most in 11 years and announced a 4 trillion yuan ($584 billion) economic stimulus package running through 2010.
Sales Volumes
“Recent measures taken by the nation to boost domestic consumption and revive economic growth have had a positive impact on the real estate market as transaction volumes have rebounded,” the State Council said, without citing figures. “We need to take more forceful measures to ensure investment in real estate and its healthy development.”
Sales volumes increased in November from the previous month in cities including Beijing, Shanghai and Shenzhen.
“This will give the market a short-term boost,” said Ken Peng, an economist with Citigroup Inc. in Shanghai. “Raising sales volumes even in the short term could help developers stay afloat and help stabilize the property market.”
In a version of the State Council statement posted earlier on the government’s Web site, the minimum period to avoid the home sales tax was three years. It was changed to two years in a re-issued statement.
The State Council called for more lending to developers of low-priced housing to alleviate what it said was a shortage of 7.5 million homes in cities and 2.4 million in the countryside.
The National Development and Reform Commission said in a separate statement today that it will offer 10 billion yuan of subsidies on affordable housing. It didn’t say who the subsidies were for.
The People’s Bank of China issued rules for lending to developers of low-cost housing, saying that banks could offer loans at a 10 percent discount to a benchmark rate. The loans must be for no more than five years and can’t exceed 20 percent of total investment in a project, it said.
“Today’s measures are unlikely to boost sales a lot,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “Home prices are still beyond the affordability of the general public.”
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China Cuts Home-Sales Tax as Property Slump Deepens Slowdown
By Eugene Tang and Luo Jun
17 December 2008
(Bloomberg) – China will reduce a tax on home sales to stem a property-market slump that may drive the world’s fourth-biggest economy into the deepest slowdown since 1990.
Sale profits, rather than prices, will now be taxed, the State Council said in a statement on a government Web site.
The measures “are much more significant than those announced in the past few months” and, with interest-rate cuts, are likely to stabilize the property market, said Peng Wensheng, head of China research at Barclays Capital in Hong Kong.
Falling home sales are undermining construction and domestic consumption just as export demand collapses because of recessions in the U.S., Europe and Japan. Building is the biggest driver for China’s expansion, contributing a quarter of fixed-asset investment and employing 77 million people.
The levy will be waived on properties sold two years after purchase, down from five years, the State Council said. The new rules apply for one year, it added, without saying when they take effect.
China’s economy may grow as little as 5.5 percent next year, the weakest pace since 1990, according to CLSA Asia Pacific Markets. That’s less than the 8 percent needed to create jobs and maintain social stability, according to China Banking Regulatory Commission Chairman Liu Mingkang.
The government will expand preferential lending rates for second-home buyers, the statement said. It called for more lending for low-cost housing projects and support for mergers and acquisitions by developers.
First-Home Buyers
Previous measures this year have included trimming costs including mortgage rates, taxes and down-payments, for first- home buyers.
After the statement was published, the central bank issued new rules for lending to developers of low-cost housing.
Home sales fell 20.6 percent in the first 11 months of 2008 from a year earlier, according to the statistics bureau.
Shanghai house prices fell 19.5 percent in the third quarter from the previous three months, according to real estate broker Savills Plc. Construction will contract 30 percent next year after expanding 9 percent in the first three quarters of 2008, according to Macquarie Securities.
The government last month cut interest rates by the most in 11 years and announced a 4 trillion yuan ($584 billion) economic stimulus package running through 2010.
Sales Volumes
“Recent measures taken by the nation to boost domestic consumption and revive economic growth have had a positive impact on the real estate market as transaction volumes have rebounded,” the State Council said, without citing figures. “We need to take more forceful measures to ensure investment in real estate and its healthy development.”
Sales volumes increased in November from the previous month in cities including Beijing, Shanghai and Shenzhen.
“This will give the market a short-term boost,” said Ken Peng, an economist with Citigroup Inc. in Shanghai. “Raising sales volumes even in the short term could help developers stay afloat and help stabilize the property market.”
In a version of the State Council statement posted earlier on the government’s Web site, the minimum period to avoid the home sales tax was three years. It was changed to two years in a re-issued statement.
The State Council called for more lending to developers of low-priced housing to alleviate what it said was a shortage of 7.5 million homes in cities and 2.4 million in the countryside.
The National Development and Reform Commission said in a separate statement today that it will offer 10 billion yuan of subsidies on affordable housing. It didn’t say who the subsidies were for.
The People’s Bank of China issued rules for lending to developers of low-cost housing, saying that banks could offer loans at a 10 percent discount to a benchmark rate. The loans must be for no more than five years and can’t exceed 20 percent of total investment in a project, it said.
“Today’s measures are unlikely to boost sales a lot,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “Home prices are still beyond the affordability of the general public.”
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