China may use tax cuts to stimulate housing market   

(Photo: CNS)

(ECNS) – Authorities are considering sales tax cuts on second-hand homes after rounds of stimulus failed to boost the property market.

An anonymous official with the State Administration of Taxation (SAT) said the SAT has been studying the possibility of lowering sales taxes on second-hand homes, but whether the plan would become a reality by year end depends on how the market performs.

On September 30, China issued what was called the strongest stimulus ever, including easing restrictions on second-home purchases and facilitating easier loans.

Effects of the measures didn't last long, however. In October, first and second-hand home sales were still on the downward slope in most cities, according to the National Bureau of Statistics.

In Beijing, statistics from 5i5j.com, a leading real estate agency, show that online sales of second-hand homes stood at 4,662 in the first half of November, 31.5 percent lower than the same period last month.

Hu Jinghui, deputy director of 5i5j, said the sluggish sales indicate there's still room for more stimulus.

China adjusted its sales tax on second-hand homes in 2005 and 2009 to crack down on speculation and cool down the sizzling property market.

Currently, sales of second-hand homes bought two to five years ago are levied a 5 percent sales tax, plus other taxes. A home priced at 1 million yuan ($160,000) incurs a total tax of 55,500 yuan ($8,800).

Some local governments have been among the first to lower the tax rate.

"Many third and fourth-tier cities have already adjusted the taxation policy, such as lowering taxes or subsidizing sales of second-hand homes," said real estate analyst Chen Jianbo.

However, effects of further stimulus won't come fast due to shrinking demand, Chen added.