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SHANGHAI: China homebuyers seem to have got the message — for now at least.
Responding to the first roll-out last month in Shanghai and Chongqing of the long-awaited property tax — which came on top of earlier nationwide measures to curb runaway prices — buyers kept out of the market last week.
In some cities, according to China media and estate agents, sentiment took such a blow that no transactions were recorded over the Lunar New Year holiday, which got underway last Thursday, Feb 3.
In Nanjing, sales got off to a slow start at the beginning of the holiday before picking up slightly.
A similar picture of slowing sales emerged in agents' reports of activity in Guangzhou and some second- and third-tier cities.
Data showed that just 16 flats were sold between last Wednesday and last Saturday in the ten districts of Guangzhou. No transactions were recorded in the city centre during the four-day holiday period.
In Zhongshan, the number of transactions fell to below ten over the four-day Lunar New Year holiday, compared to average daily sales of around 200 before the measures were announced.
Agents noted that the drop in sales in Shanghai and Chongqing was a response to the introduction of the property tax.
Shanghai announced a trial annual tax which was effective from Jan 28. The tax will be levied annually at a rate of 0.6% based on valuation, and 0.4% for houses that were sold at less than 50% of the average price last year.
The tax will apply to new houses but not the first property purchase by a Shanghai resident. But non-Shanghai residents will have to pay the tax on their first home purchase.
In Chongqing, if the purchase price of a property is below three times the city average, an annual tax will be levied at a rate of 0.5%.
Houses priced at three times to four times the average will attract tax at a rate of 1%, and houses priced at above four times the city average will be taxed at 1.2%.
The tax was also effective from January 28 and applies to existing and newly-purchased single detached villas and purchases of high-end homes.
Non-Chongqing residents will pay the tax on second homes bought in the city.
The taxes were introduced a day after the State Council announced new nationwide policies aimed at curbing demand and price growth in the property market, including an increase in the required minimum down payment to 60% of the sale price of a home, from 50% previously.
In addition, mainlanders are barred from buying another house if they already own more than two properties in the city in which they are resident.
The slowdown in home sales was caused by property buyers becoming cautious as a result of the new measures, said Alan Chiang Sheung-lai, head of residential property for agency DTZ.
"But it is too early to judge the effectiveness of the new policies based on the short period and the small number of transactions," Chiang said.
He said that the slowdown could also have been triggered by seasonal factors, with the Lunar New Year holiday being traditionally a slow period for housing transactions.
The State Council ordered 36 cities to implement home-purchase limits, including Beijing, Shanghai, Tianjin, Chongqing, Dalian, Qingdao, Ningbo, Xiamen, Shenzhen and 27 provincial capital cities.
Centaline Property earlier predicted that the number of cities would extend to 60. — SCMP
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