China's policy toolkit saves home purchase costs, spurs demand
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E-mail Xinhua, November 18, 2022
Tax reliefs, mortgage rate cuts and other measures rolled out in favor of China's home buyers are spurring demand and stabilizing property market expectations, analysts say.
China announced in late September that it would refund personal income taxes collected from any homeowner who is selling their current house to buy a new one.
The relief measure, which is in place from October to the end of next year, has tipped the scale in favor of relocating to new homes for many people. In southwest China's Chengdu, a resident surnamed Liu said the measure saved him almost 20,000 yuan (about 2,813 U.S. dollars) when he sold his old house.
While income tax varies proportionate to the price of each home, the measure can save eligible residents 30,000 to 50,000 yuan in most cities.
In addition to tax reliefs, China has allowed commercial banks to reduce the floor of interest rates on home loans by 20 basis points for first-home buyers, based on the tenor of the benchmark loan prime rate.
The loan interest rates of the housing provident funds for these buyers have also been cut, dropping 0.15 percentage points.
China has also granted leeway for eligible cities to maintain, slash or scrap lower limits for first-home mortgage rates until the end of this year. The lowest rates in over 20 cities, including Tianjin and Wuhan, are down to below 4 percent, according to data from the China Index Academy.
The relief measures encourage city-specific policies and restore property market confidence, making it easier for localities to stabilize land prices, housing prices and market expectations, said Liu Hongyu, a professor at Tsinghua University.
Industry insiders say current first-home mortgage rates are in a historic trough, and housing costs are falling.
According to a report from the People's Bank of China, mortgage rates for personal housing loans issued in October were at 4.3 percent, down 4 basis points from the previous month and 133 basis points from the end of last year.
The new policies are gradually paying off, boosting home sales. Data from the Ministry of Housing and Urban-Rural Development shows that the turnover of new homes in many cities, including Beijing, Chongqing, Xiamen and Shenyang, rose over 10 percent month on month in October in terms of area.
The sales volume of pre-owned homes in 50 cities monitored by the Beike Research Institute expanded in October, up both from September and a year ago, pointing to warming demand.
Still, analysts warn of the unstable recovery of the property market, as well as residents' cautious attitude toward home purchases, affected by recent COVID-19 outbreaks.
Upholding the idea that "housing is for living in, not for speculation," China has repeatedly underlined the importance of supporting people's essential housing needs, as well as their need for better housing.
The importance of efforts to make full and good use of this policy toolkit by adopting city-specific policies to shore up the property market has also been underscored.
In the mid-to-long term, the property market has solid prospects, as China's sound economic fundamentals and progressing urbanization will continue to bolster housing demand, said Liu Lin, a researcher at the Chinese Academy of Macroeconomic Research.
