Insiders expect a slowdown in second-hand property transactions across the
country, after property owners rushed to finish deals on their housing units
before yesterday's deadline to evade a tax increase.
Last Wednesday, the State Administration of Taxation announced that a 20 per
cent individual income tax would be imposed on second-hand house sellers
starting August 1. The number of such transactions in Beijing and Shanghai
soared prior to the deadline.
On Monday, one day before the policy took effect, more than 500 people went
to the local taxation bureau in Beijing's Chaoyang District to trade their
houses, which was five times more than is ordinary, the bureau said.
On the same day in the capital's Haidian, Fengtai and Chongwen districts, the
numbers of transactions increased by about 600 per cent despite the heavy rain.
"Nobody wants to pay the extra tax," said 54-year-old Chang Chunxia, who was
waiting in the Chongwen taxation bureau.
She said her family had decided to buy a flat at Huashi Beili from a friend,
but they had not yet finished the transaction. Under the new policy, she would
have to pay an extra amount of 20,000 yuan (US$2,500).
"It's a large sum," she said. "We hope the transaction could be finished
today so that the money could be saved."
Figures from the Hanyu Property Company in Shanghai show that the trading
volume it handled from Thursday to Monday equalled the total of the other 26
days in July, reaching 160 apartment units.
The Shanghai-based Centaline Property Company also said its overall trading
volume rose by 30 per cent to 40 per cent in the last five days. Trade volumes
in its Pudong, Hongkou and Luwan branches saw a sharp increase of 50 per cent.
Faced with such a large number of traders, local taxation bureaux in Beijing
decided that anyone who went to the bureaux to register the sales of their
houses before yesterday's deadline and finish the transactions by the end of
this month could be exempted from the tax.
The new policy, which follows a series of central government measures
announced earlier this year to cool down the overheated real-estate market, is
expected to further squeeze speculation.
Figures from the National Bureau of Statistics show that by the end of this
June, more than 121 million square metres of commercial houses had remained
unoccupied nationwide because of the rising price, up 17.2 per cent over the
same period last year.
Lin Zengjie, land management professor at Renmin University, described
speculation as "a major contributor to the rising price," Xinhua reported.
"The collection of individual income tax and transaction fees may increase
the speculation cost, and thus is beneficiary to the development of a healthy
market," he was quoted as saying.
The government started to collect a 5.5 per cent transaction tax on sale of
houses within five years of purchase this June, also a move to fight against
speculation.
Xin Xin, a broker with the chained 5i5j Property Company in Beijing, told
China Daily that the latter policy would not be as strict as the earlier one as
it contains many favourable items.
The base of the individual income tax is transaction price minus the original
price. Reasonable costs, including home improvement and facility maintenance
expenditure as well as mortgage interest, would be excluded from the taxable
amount. But the base of the transaction fees is the total transaction price.
Xin also warned of the "possibility that sellers shift the extra tax to
buyers, which may increase the price of second-hand houses."
(China Daily 08/02/2006 page2)
