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New housing market policy boosts consumer confidence

(Xinhua)
Updated: 2008-10-23 21:43

SHANGHAI -- To An Wei, a white-collar worker in Shanghai, China's tax exemption on house purchase and mortgage deposits reduction announced on Wednesday night were a real stimulus for home buying.

"The new policy would not only save me more than 4,400 yuan (US$644) from the tax reduction in purchasing a 90-square-meter flat in Shanghai and make it earlier to obtain a bank loan to pay for the mortgage, but also give me confidence in the stability of the housing market," said the newlywed IT worker.

A real estate broker introduces apartments for sale to a potential home buyer at a housing exhibition in southwest China's Chongqing Municipality, October 23, 2008. [Xinhua]

The Ministry of Finance, the State Administration of Taxation and the People's Bank of China, the country's central bank, made the synchronous move on Wednesday to announce a series of new measures to boost the domestic real estate market, which had shown signs of slowing amid the global financial turmoil.

"The policy is concentrated on tax reduction and relaxing restrictions on financial institutes to give loans to private home buyers," said Nie Meisheng, the Chamber of Real Estate of the All-China Federation of Industry and Commerce director.

The chamber was one of the advisors prompting the promulgation of the policy.

Nie said the policy, aimed at benefiting home buyers, rather than bailing out property developers, can woo potential purchasers' confidence.

The Ministry of Finance announced on Wednesday to exempt the stamp tax on property purchase and the value-added tax of land on property sales, starting from November 1, to boost the slowing real estate sector.

The central bank announced to lower the threshold of the down payment for those making their first home purchase for self use from 30 percent to 20 percent. This would start as of Monday.

According to the financial website caijing.com.cn more measures to benefit the sector are on the table of the Ministry of Housing and Urban-Rural Development.

The report said the housing authority was likely to give more stimulus to the trade of second-hand houses to further revitalize the property sector.

Shanghai disclosed its regional housing policy immediately after the national policy was announced. The city government made bolder encouragements in the policy adjustment, especially in the trading of second-hand houses.

Related readings:  Housing market gets lift  China announces tax exemption to boost property sector  China cuts taxes, rates to boost housing market  Govt policies to boost housing sales, not prices

"With the new policy, I could save 90,000 yuan in taxation from selling a 60-square meter flat that I bought in 2006," said Shanghai resident Zhuang Xiaowei, intently reading over Thursday's local newspaper reports on the housing policy.

He said the city had taxed second-hand house transactions heavily over the past few years, which he fully understood was "an effort to rein in the over-heated property market."

The National Bureau of Statistics reported property prices in major cities increased 3.5 percent in September from a year ago, the slowest pace in more than three years. Meanwhile, people's enthusiasm to buy tumbled to its lowest point in a decade.

The shrinking household consumption reflected a general trend of global economic slowdown, said Yi Bocheng, a professor at the Shanghai-based Fudan University.

He said the government's policy stimulation would help set free potential consumption tendency.

A recent survey of 4,807 Beijing college undergraduates suggested 57.6 percent were potential home buyers in the next five years. About half said they would choose a house of 70 to 90 square meters.

The China Youth Daily survey showed 55 percent of the future home buyers said they would apply for bank loans to pay for the mortgage. The rest admitted they would need their parents' financial support to get a home.