China is looking at slashing taxes for home purchases as the authorities enhance their fiscal support to help recover the housing market which is going through a crisis. Media reports said that the Chinese authorities are working on a proposal that will allow major cities such as Shanghai and Beijing to cut down taxes for home buyers.
Citing sources familiar with the matter, Bloomberg reported that the Chinese regulators are considering lowering the deed tax for buyers to as low as 1 per cent from the current level of as much as 3 per cent. The report quoting people in the know said the city governments are planning to change the norms.
These measures were hinted by Finance Minister Lan Fo’an. This highlighted the government’s intent to utilise fiscal measures to help revive the sluggish economy and focus on monetary easing.
Lan promised to carry out ‘more forceful’ fiscal measures next year after the minister revealed a 10 trillion yuan debt swap for local governments. As part of the latest proposal, mega cities are expected to be allowed to cut down the distinction between ordinary and luxury homes, and this would majorly reduce purchasing costs for people planning to upgrade their homes.
Initially, the Chinese authorities signalled this plan in July. Additionally, homeowners in China also face high value-added taxes of nearly 5 per cent if they plan to offload their residences in two years.
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Notably, economists are also asking for fiscal support to make sure China meets its economic growth target of roughly 5 per cent this year. President Xi Jingping also stressed the need to meet this goal earlier.
This decision to reduce property taxes is expected to help reignite investors’ expectations for large-scale stimulus payments to revive domestic demands and fight deflation.
In October, residential property sales climbed for the first time this year, suggesting that support measures were aiding in instilling more confidence in buyers. However, the recovery was uneven as state developers benefitted from the stimulus and buyers prefer existing homes.
