China cuts its housing lending rates and taxes

Estate brokers introduce apartments for sales to potential home buyers at a housing exhibition in Shenyang, Northeast China's Liaoning Province, September 12, 2008. [Xinhua]
Beijing has decided to reduce taxation on home buying, do away with property stamp tax, and cut the mortgage rates by as deep as 30 percent, in a concerted package of new policies to stave off a housing sector slump. from November 1, the property deed tax will decline to 1 percent from 3-5 percent for people buying their first home if it is or smaller than 90 square meters.

For those buying their first home, regardless of the size, the down payment requirement will be lowered to 20 percent from the present 30 percent, and banks will be allowed to charge as little as 70 percent of benchmark lending rates for the mortgages. The new policy also removed the 0.05 percent stamp tax and land value-added tax for home purchases starting from next month.

Real estate investment is the second-largest contributor to China's urban fixed-asset investment, which is a major driver of the overall economy. To build more affordable housing, Beijing may launch a 1 trillion yuan fund to build affordable houses for poorer citizens.

A view of apartment buildings in Shanghai, May 18, 2008. [Xinhua]
Chinese economists have cautioned that a worsening slump in the real estate market in China would not only undermine the healthy growth of the economy, but also put the country's financial system at risk. Housing prices have drop at least four months consecutive in China. For example, in September, the housing price in southern city of Shenzhen plunged by 5.3 percent from a month ago.

To prevent the same scenario from happening mortgage meltdown in the US and Europe, the 18 Chinese cities have resorted to measures, including doling out subsidies to private homebuyers, unprecedented since former Prime Minister Zhu Rongji launched privatization policies of housing; cutting taxes on housing deeds, and even giving permanent urban residents permits to lure outside homebuyers, in Hangzhou's case.


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Sources :

China Daily: Beijing cuts rates, taxes to boost housing, October 22, 2008 21:29

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