China will reduce the tax on home sales to stem a property-market slump. Sale profits, rather than prices, will now be taxed, the State Council said in a statement on a government Web site.
Peng Wensheng, head of China research at Barclays Capital in Hong Kong said the measures ‘are much more significant than those announced in the past few months’ and, with interest-rate cuts, are likely to stabilize the property market.
Falling home sales are undermining construction and domestic consumption just as export demand retreats because of recessions in the United States, Europe and Japan.
Building is the biggest driver for China’s expansion, contributing a quarter of fixed-asset investment and employing 77 million people.
The State Council said the levy will be waived on properties sold two years after purchase, down from five years. The new rules apply for one year, it added, without saying when they take effect.
The People’s Bank of China issued rules for lending to developers of low-cost housing, saying that banks could offer loans at a 10% discount to a benchmark rate. The loans must be for no more than five years and can’t exceed 20% of total investment in a project.