Apr 10, 2019 (China Knowledge) - Number of homes sold in the southern Chinese city of Dongguan in Guangdong province tripled in March from the previous month after a change in the local government tax policy helped to lower tax on home sales.
The new tax policy in Dongguan gave home sellers the option to either pay a 20% tax on the increase in value of their property since they bought it or a 2% tax on the total transaction price. In the past, home owners only had the option of the 20% tax.
The new tax option means that it is better for sellers whose homes had appreciated by more than 11.1% in value and considering that from 2016 to 2018, the average home price in Dongguan had increased by 30%, this means that tax paid by home sellers has effectively been reduced.
The policy change helps to remove current obstacles in the Chinese property market and will increase demand for existing homes and also encourage more existing home-owners to sell their homes.
As the Chinese economy slows down, the government has softened its stance on the nation’s property markets from one of reining in property prices to one of keeping property prices stable and allowing local governments to make their own policy adjustments based on their own local markets.
Dongguan is one of the many cities in China that have since loosened property restrictions. Apart from Dongguan, even major cities such as Beijing, Shanghai and Guangzhou have loosened policies such as by lowering property transaction tax, value-added tax and stamp duty on existing home sales.
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