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Print Edition> Business
UPDATED: February 12, 2011 NO. 7 FEBRUARY 17, 2011
Cooling the Property Fever
China announces toughest-ever regulations to tame the sizzling housing market

According to Zhang, the new policy was even stricter than the purchase limit implemented in some big cities before, because families that have two houses are not allowed to buy another.

If the policy limiting housing purchases is implemented efficiently, the effect will be seen instantly and the number of property transactions in February may be influenced, said Zhang.

Local implementation

Local governments will be responsible for the stable and healthy growth of property markets and are required to publicize the annual "controlled" price targets of new homes before the end of March 2011. The targets should be set based upon local governments' economic development targets, disposable income growth and the affordability of residential housing, the statement said.

"As soon as a local government publicizes its annual 'controlled' price targets for new homes, it will be exposed to public supervision and be urged to fulfill its promise," said Liu Yuanchun, Associate Dean of the School of Economics at the Renmin University of China.

The new policy also requires local governments to increase land supply, acquire more affordable houses—via various means, including construction, purchases and long-term rental—and increase the supply of public rental housing.

State Council's measures to regulate the property market

1. Local governments should set property price-control targets for 2011 and make them public by the end of March.

2. The supply of affordable housing and public rental housing should both be increased.

3. Properties sold within five years of purchase will be subject to a tax, based on the selling price. A levy of value-added tax on land should be monitored and a levy of the individual's income tax should be strictly implemented upon sale of the house.

4. The minimum down payment required on second home purchases will rise from 50 percent to 60 percent. Interest rates for second-home mortgages should be no less than 110 percent of the benchmark interest rates.

5. Management of land supply for properties should be strengthened.

Land for affordable housing, the renovation of shantytowns, and small and medium-sized commercial housing should account for at least 70 percent of the region's total land supply for properties.

6. Home purchase limits should be adopted in large cities or cities where housing prices are high or rise very fast.

7. Local governments should be accountable for failing to maintain affordable housing supply or stabilize property prices.

8. Citizens should be guided toward rational housing consumption. Those spreading rumors and false information will be punished.

Property taxes adopted by Chongqing and Shanghai

(both effective on January 28, 2011)

Chongqing set its property tax rate at 0.5-1.2 percent.

It will tax all villas as well as new apartments priced at least two times the average price of all new homes in the city, said Chongqing Mayor Huang Qifan.

Annual tax rates are 0.5 percent of the transaction prices for villas and apartments priced less than three times the average price; 1 percent for those priced three to four times the average; and 1.2 percent for those priced more than four times the average.

For families, the first 180 square meters of villas and the first 100 square meters of high-end apartments are exempt from tax. For non-permanent residents who don't work or run companies in Chongqing, second homes will be taxed at 0.5 percent regardless of the price.

Shanghai set its property tax rate at 0.6 percent.

Newly purchased homes for permanent residents in Shanghai who own more than one house will be taxed on the basis of total square meters of properties owned. If someone owns two houses, tax will be assessed on the floor space that exceeds 60 square meters per person, according to the Shanghai Municipal Government.

All new houses bought by non-permanent residents will be taxed, but buyers can get a tax refund for their first house after they work in Shanghai for three years.

For housing priced less than two times the average price of the previous year, the tax rate is 0.4 percent.


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