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E-mail China.org.cn, February 17, 2025
Jiupai News:
In 2024, China's real estate market showed signs of stabilization, with property prices starting to level off. What fiscal policies are being considered to support this market? Thank you.
Liao Min:
This is an important question. Mr. Lin will address it. Thank you.
Lin Zechang:
Thank you for your question. On Sept. 26, 2024, a meeting of the Political Bureau of the CPC Central Committee emphasized the importance of stabilizing the property market and reversing its downturn. Various departments have introduced a series of policies, and the sector is gaining positive momentum in some cities, indicating that these measures are starting to take effect. Here, I'd like to provide a brief overview of the fiscal-related policies, focusing on two main aspects.
First, we have adjusted tax policies to lower the tax burden during the transaction and development stages. For example, we have optimized preferential deed tax policies for housing transactions. The statutory deed tax rate ranges from 3% to 5%. Previously, first-time homebuyers and second-home purchasers of units under 90 square meters were taxed at 1%, while units over 90 square meters faced a tax rate of 1.5% for first homes and 2% for second homes. However, these preferential policies for second homes did not apply in first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen. Under the latest policy, the applicable 1% tax rate has been extended from properties under 90 square meters to those under 140 square meters. Properties over 140 square meters are taxed at 1.5% for first homes and 2% for second homes. Additionally, these preferential policies now apply equally to first-tier cities.
Furthermore, we've eliminated the distinction between ordinary and non-ordinary housing for value-added tax and land appreciation tax purposes. This change particularly affects Beijing, Shanghai, Guangzhou and Shenzhen. Previously, residents in these cities were required to pay VAT when selling non-ordinary housing units that had been held for two years or more. With the elimination of this distinction, all housing transactions in these cities can now benefit from VAT exemptions.
These policy benefits are substantial. For example, second-home buyers purchasing a 120-square-meter apartment in non-first-tier cities can now save 50% on deed tax. In first-tier cities, where such preferential policies didn't exist previously, buyers can save up to two-thirds on deed tax for a similar property. These changes offer significant and tangible benefits for homebuyers.
Additionally, the State Taxation Administration has optimized its collection policies by reducing the minimum prepayment rate for land appreciation tax by 0.5 percentage points, which helps alleviate the financial pressure on real estate enterprises.
These policies aim to benefit both enterprises and individuals and have received a positive response from the market. Transaction activity has notably increased in core cities. According to statistics, in December, the sales area of new commercial housing in 100 key cities increased by approximately 17% month on month and 18% year on year. Moving forward, our focus will be on ensuring effective implementation of these policies to maximize their intended impact.
Second, we have explored expanding the use of special-purpose bonds to include two key areas related to real estate, both aimed at increasing effective demand. Within the newly issued special bond quota for 2025, local governments can allocate funds as needed for land reserves and the acquisition of existing commercial housing to be used as affordable housing. These policies, announced at the end of last year, are expected to yield progressive results throughout 2025.
Regarding land reserves, we support municipal governments in reclaiming and purchasing idle land. Additionally, areas with demand may also acquire new land reserves. We have established clear requirements for the management of special-purpose bonds, and local authorities have begun implementing them. This policy will help optimize the dynamics of land supply and demand, enhance the liquidity of real estate enterprises, and strengthen land reserves in key areas.
We are focusing on support for acquiring existing commercial housing to be used as affordable housing. Recently, we have been actively collaborating with the relevant industry authorities to advance this initiative. This effort has included extensive field research, organizing discussion forums to gather input from various stakeholders, and carefully considering the demands and needs of local governments. We will continue to collaborate with the relevant authorities to swiftly finalize the related policies. Once these policies are clarified, local governments will be able to implement them accordingly.
You may have noticed that in the fourth quarter of last year, several indicators of the real estate market showed improvement, and positive changes are gradually increasing. We believe that as policies continue to take effect and new development models for the real estate sector gradually take shape, the market will further stabilize and move toward recovery.
That's all I have to say about this topic. Thanks.
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