China is planning to reduce taxes on home purchases as part of a broader effort to stimulate the country's sluggish housing market. Officials are working on a proposal that could lower the deed tax for homebuyers in major cities, including Shanghai and Beijing, from a current rate of up to 3% to as low as 1%. The proposal also allows city governments to make adjustments to these rules.
This move follows a statement from Finance Minister Lan Fo’an, who mentioned the government’s commitment to stronger fiscal policies to support the economy. The tax cuts are aimed at boosting the housing market, which has been in decline, and are expected to be paired with other fiscal and monetary measures to provide economic relief.
Under the new proposal, major cities like Shanghai will also have the option to eliminate the distinction between ordinary and luxury homes. This change could significantly reduce costs for those looking to buy larger or more expensive properties. Currently, in cities like Shanghai, homes larger than 144 square meters (1,550 square feet) are classified as “non-ordinary.”
Raymond Cheng, head of China property research at CGS International Securities, said that the tax cut could help reduce home-buying costs and stimulate property sales.
While the Chinese government has yet to respond to inquiries about the proposal, economists are calling for more fiscal support to meet the country's economic growth target of 5% this year. The housing market’s downturn has led to a significant loss of household wealth, further contributing to deflationary pressures.
This tax reduction is in line with earlier expectations that the government would take action to support the real estate sector. The move also comes after China’s recent policy changes, including cuts to borrowing costs, relaxed buying restrictions in major cities, and eased down payment requirements. These measures have led to a rise in residential property sales, although the recovery remains uneven, with state-owned developers benefiting the most.
China has also pledged to increase loans for unfinished residential projects, although analysts have expressed concerns over the lack of clear figures and concrete measures to address the country’s housing oversupply.
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