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Tax cuts mulled to heal property woes

By Hu Yuanyuan (China Daily)
Updated: 2008-12-12 08:06

The government is likely to cut the business and income tax levied on property transactions to further stimulate the real estate market, according to industry insiders.

People visit a house fair in Shanghai on March 21, 2008.Policy makers at the recently concluded Central Economic Work Conference (CEWC) have recommended the construction of more low-cost houses and reducing the tax burden for individual home purchases. [asianewsphoto]

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Policy makers at the recently concluded Central Economic Work Conference (CEWC) have recommended the construction of more low-cost houses and reducing the tax burden for individual home purchases.

Property deed tax, business tax and income tax are major hurdles for new homebuyers and also in second-hand house deals, said Yang Shaofeng, Managing Director, Conworld, a Beijing-based property broker.

The taxes on buying a second-hand apartment could be around 7 percent or even near 10 percent if the apartment is larger than 140 sq m.

"The Ministry of Finance, State Administration of Taxation and the Ministry of Housing and Urban-Rural Development may reduce the taxes soon, in line with the central government decision in the CEWC," Yang said.

"The move will trigger housing demand and boost property developers' profits," he added.

Meanwhile, sources told China Daily that the China Real Estate Association has submitted a proposal to the National Development and Reform Commission seeking more favorable policies to help the troubled sector.

"We have made some suggestions to the top economic planner," said Zhu Zhongyi, vice-chairman of China Real Estate Association.

The proposals include cutting income tax for real estate firms, encouraging local governments to buy common residential buildings to house low-income families and urging banks to finance quality property projects.

"The proposal are not really aimed to 'save' the sluggish property market, but to fight against the country's sliding economy amid the worsening global financial turmoil," said Qin Xiaomei, research chief at CB Richard Ellis' Beijing branch.

Property investment usually accounts for 25 percent of the overall investment. In some cities, this proportion could be even above 50 percent.

In November, property prices in 70 major Chinese cities rose 0.2 percent from a year earlier, or 1.4 percentage points lower than October, the National Development and Reform Commission (NDRC) said.

The growth rate was the lowest since the NDRC started to publish its figures in July 2005.

According to the Beijing Property Transaction Management website, 13,721 forward delivery housing deals were inked in November, up 48 percent from the previous month.

Statistics from Shanghai UWIN Real Estate Research Center show that 6,201 units of new apartments with floor area of 717,551 sq m were sold in Shanghai in November, compared with 459,764 sq m in October.