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 percent 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 percent 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 percent to 40 percent in the last five days. Trade volumes in its Pudong, Hongkou and Luwan branches saw a sharp increase of 50 percent.
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 meters of commercial houses had remained unoccupied nationwide because of the rising price, up 17.2 percent 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 percent 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 favorable 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 August 2, 2006)