Beijing cuts rates, taxes to boost housing

Beijing has decided to reduce taxation on home buying, do away with property stamp tax, and cut the mortgage rates by as deep as 30 percent, in a concerted package of new policies to stave off a housing sector slump.

A statement published by the official website of the Ministry of Finance late Wednesday, ruled that, from November 1, the property deed tax will decline to 1 percent from 3-5 percent for people buying their first home if it is or smaller than 90 square meters.
For those buying their first home, regardless of the size, the down payment requirement will be lowered to 20 percent from the present 30 percent, and banks will be allowed to charge as little as 70 percent of benchmark lending rates for the mortgages.

The new policy, which was obviously approved at an emergency meeting of the State Council, chaired by Premier Wen Jiabao over the weekend, also removed the 0.05 percent stamp tax and land value-added tax for home purchases starting from next month.

The move marks an initial unwinding of property tightening measures that the government put in place over the last few years, to counter what were then rapidly rising prices and a skyrocketing inflationary pressure.

The change of policy by Beijing comes just two days after the National Bureau of Statistics reported that annual gross domestic product growth in the third quarter slowed sharply, to 9.0 percent from 10.1 percent in the second quarter.

Real estate investment is the second-largest contributor to China's urban fixed-asset investment, which is a major driver of the overall economy. Policy-makers are concerned that a selling lull in urban properties could drag the economy to its ebb, a scenario they are trying their most to avoid, in the backdrop of an extending world financial crisis and a subsequent economic slowdown.