TAX CUTS AIM TO BOLSTER LAGGING REAL ESTATE MARKET

The government's tax cutting measures issued on October 22 were an attempt to bolster China's sagging real estate market, however the initial impact on the market has been minimal.

Du Yusong, partner at Grandall, said the government's move to reduce transaction taxes will only relieve the burden on individuals and will do little to boost activity in the property market.

“Many prospective buyers are still waiting for the government to issue more measures, so that they can purchase at even lower prices. Property developers get little benefit from these measures,” Du said.

What the housing market needs, he said, is steady and reasonable prices, while the government should consider the entire market as a whole instead of merely lowering purchasing prices by cutting tax.

The rules, issued by the Ministry of Finance and State Administration of Taxation, have reduced the contract tax to 1% for individual first time buyers of common housing below 90 square meters, and temporarily exempt stamp-duty tax for individual's housing sales and purchases. Also in the rules are temporary exemptions for land value-added tax for individual sales.

“If someone construes the notice as measures to save property sales or even property developers, then someone has clearly got the message wrong,” Du said.