Insiders expect a slowdown in second-hand property transactions
across the country after property owners rushed to close deals on
their homes before yesterday's deadline and therefore evade a tax
increase.
Last Wednesday the State Administration of Taxation announced
that a 20 percent individual income tax would be imposed on
second-hand house sellers starting August 1. The number of such
transactions in Beijing and Shanghai soared prior to the
deadline.
On Monday, one day before the policy came into existence, over
500 people visited the local taxation bureau in Beijing's Chaoyang
District to trade their homes. This was five times more than usual,
said the bureau.
On the same day in the capital's Haidian, Fengtai and Chongwen
districts the number of transactions increased by about 600 percent
despite the very heavy rain. "Nobody wants to pay the extra tax,"
said 54-year-old Chang Chunxia, who was waiting in the Chongwen
taxation bureau.
She said her family had decided to buy a flat at Huashi Beili
from a friend but they'd not yet completed the transaction. Under
the new policy she'd have to pay an extra 20,000 yuan (US$2,500).
"It's a large sum," she said. "We hope the transaction can be
finished today so the money is saved."
Figures from the Hanyu Property Company in Shanghai showed that
the trading volume it handled from Thursday to Monday was
equivalent to the total of the other 26 days in July with it doing
business involving 160 apartments.
The Shanghai-based Centaline Property Company said its overall
trading volume rose by 30 to 40 percent in the last five days.
Trade volume at its Pudong, Hongkou and Luwan branches saw a sharp
increase of 50 percent.
Faced with so many transactions the local taxation bureau in
Beijing decided that anyone who went to the bureau to register
their house sales before yesterday's deadline and completed the
deals by the end of the month would be exempted from the tax.
The new policy, which follows a series of central government
measures announced earlier this year to cool the overheated
real-estate market, is expected to further squeeze speculation.
Figures from the National Bureau of Statistics show that by the
end of June more than 121 million square meters of commercial
housing had remained unoccupied nationwide because of rising
prices-- up 17.2 percent over the same period last year.
Lin Zengjie, land management professor at Renmin University,
described speculation as "a major contributor to the rising price,"
Xinhua reported. "The collection of individual income tax and
transaction fees may increase the speculation cost and thus is of
benefit to the development of a healthy market," he's quoted as
saying.
The government started to collect a 5.5 percent transaction tax
on house sales within five years of purchase this June in another
move to fight back against speculators.
Xin Xin, a broker with the 5i5j Property Company in Beijing,
told China Daily that the latter policy wasn't as strict
as the earlier one as it contained a number of favorable items.
The base of the individual income tax is transaction price minus
the original price. Reasonable costs including home improvements
and facility maintenance expenditure as well as mortgage interest
would be excluded from the taxable amount. But the base of the
transaction fee is the total transaction price. Xin also warned of
the "possibility that sellers shift the extra tax to buyers which
may increase the price of second-hand houses."
(China Daily August 2, 2006)