China Announces Stringent Policies to Curb Rising House Prices
28 Jan, 2011, China
The real estate market in China saw a series of strict control policies in 2010, which brought some effective results in restricting the speculation in the housing market. Just a week before the Chinese New Year, the central government launched a new series of regulation policies. On January 26 2011, a statement aimed at reining in soaring housing prices was released. The “New 8 Measures”, considered the toughest ever, have set the main theme for the real estate market this year.
Under the New 8 Measures, local governments will hold more responsibility for controlling the housing prices, encouraging low-cost housing projects, as well as adjusting the tax policies on properties, especially high-end housing. They will also need to tighten the control of property development supply , in order to curb investment and speculation in the housing sector.
Shanghai and Chongqing both immediately issued detailed regulations on property. In Shanghai, local residents who purchase the second house under the same household will be subjected to 0.4% to 0.6% tax, depending on the property price. In Chongqing, local residents who purchase villas, high-end apartments, and non-indigenous homeowners with one house who want to purchase a second one, will also be subjected to 0.5% to 1.2%. tax rates.
Andy Zhang, Managing Director of Cushman & Wakefield China Operations, shared his opinion on these new regulations, “From the New 8 Measures, to the new tax rules in Shanghai and Chongqing, we can see that the government is sending a strong message - houses should return to their basics, which is to be as a shelter by function, and not a vehicle for speculation.”
In terms of what effect these regulations will have on the commercial property market, he pointed out, “Should these measures effectively squeeze out the bubble and curb speculation, demand for investment purchase will substantially shrink. As a result, sales volume in mid to high end residential sector will decrease substantially. More investment both from developers and retail buyers will be directed at commercial properties, if they still choose to engage in property investment.”
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