Shanghai saw a rush to sell houses over the past two days after the central government said that a 20 percent tax on sellers' profits on second homes would be strictly imposed in a bid to curb speculation.

Friday's announcement prompted both buyers and sellers to hurry to close deals over the weekend before details of how the measure would be implemented came out.

The tax is aimed at those seeking to make money from China's overheated housing market.

Houses bought more than five years ago as a seller's only residence are exempt from tax when resold. But people who own two houses and want to sell one of them are now targets in the bid to thwart profiteers and protect ordinary buyers.

"The kid needs to go to school, and get married. What we have are all small houses," a woman at a real estate exchange center in Shanghai said yesterday when asked why she was selling.

Ultimately, it will be buyers who will pay the price as it will be added to the asking price.

"We have an urgent need to buy a house. And we will have to cope with the extra costs," said a home buyer commenting on the new tax policy.

"In the past, I was thinking about buying a well-located pre-owned one. But now I only consider new houses," another would-be used house buyer said.

The State Council has also said that cities where house prices had increased noticeably fast may raise borrowing costs for second-home buyers, who currently need to make an initial 60 percent deposit.

The past decade has seen nine rounds of such policies by the central government to cool the housing market, but none seems to have had much of an impact.

Monitoring by the China index Academy shows that the price of new homes rose for the ninth consecutive month in February, with the average cost in Shanghai hitting a record high, according to data compiled by Shanghai Deovolente Realty Co.

Double tightening measures to bring down house prices - tightening the supply of credit and land to the real estate industry in a bid to get developers to boost sales by cutting prices - were largely offset by monetary easing, Chen Baocun, deputy secretary-general of National Real Estate Manager Alliance said.

"The land supply in first and second-tier cities is now in stalemate while the demand for school district houses and better living conditions is on the rise." Chen said.

The supply-demand mismatch will certainly cause big price fluctuations, and any price rebound under the curbs will be a violent one," Chen added.

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