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Beijing and Shanghai have introduced tax incentives to revive China's struggling property market, exempting value-added tax (VAT) on properties held for over two years and raising the deed tax threshold to homes larger than 140 square metres. While these measures follow nationwide tax breaks on home and land transactions, market response has been muted, reflecting broader confidence issues. Analysts stress the need for robust policies addressing income stability and economic growth to reignite demand. Though tier-one and tier-two cities show signs of stabilisation, experts view these steps as partial solutions, requiring systemic reforms for long-term recovery in the property sector.
Beijing and Shanghai have introduced new tax incentives aimed at boosting home sales as China's property sector continues to face challenges. The measures, announced by local authorities, are part of broader efforts to revive a market that once contributed nearly a quarter of the country's economic activity. Advertisement
Key initiatives include exempting residents who sell a property after holding it for more than two years from paying value-added tax (VAT). Additionally, the standard for levying deed tax has been raised, now applying only to properties larger than 140 square metres, up from 90 square metres. These measures follow recent nationwide steps by China's finance ministry, which included tax breaks on home and land transactions.
Despite these efforts, market response has been muted. Property stocks in China and Hong Kong have shown limited improvement, reflecting the deeper confidence issues among consumers and investors. Analysts suggest that while these policy changes may provide some relief, they are unlikely to significantly reverse the market downturn without more robust economic support.
Experts believe that more sustained and bold measures will be required to rebuild confidence in the property sector. Steps such as lowering down payment requirements and relaxing home purchase restrictions introduced in September have had a positive impact in some regions, but the overall recovery remains fragile. Analysts, including Bruce Pang of JLL, highlight the need for policies that address broader concerns, such as income stability and economic growth, to truly reignite demand in the sector.
As China's real estate market struggles to stabilise, tier-one and tier-two cities show signs of bottoming out, according to Zhang Dawei of Centaline. However, the long-term recovery will depend on the government's ability to address systemic issues, ensuring a more stable outlook for housing prices and consumer confidence. The steps taken by Beijing and Shanghai could serve as a blueprint for other cities, but they remain just one part of the broader solution needed to tackle the challenges in the property sector.
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