New profit-gain tax spurs housing transactions

Fresh property curbing measures announced last week are having an immediate effect on China's housing market. Second-hand home transactions in Beijing increased almost 100 percent compared to normal figures. In addition, a number of real estate agencies have seen inquiries and trading volumes spike, to take advantage of the period before the new policies are implemented.

China's State Council says the new rules will enforce a capital-gains tax of 20 percent on profits from home sales. In response, home sales have soared in the days following the announcement. Figures from Beijing housing authorities show, second-hand home sales have surged by 100 percent. In Beijing's Chaoyang district, where the most second-home trades took place across the city, realtors have posted conspicuous ads to show they can offer advice on the measures.

"We used to have one or two people coming in every day. But this volume has gone up by two or three times. Some come for advice, and others come feeling under pressure from the new tax increases."

The new rules still need time to be implemented, as local governments are being asked to make individual provisions that take into account local market conditions. At present, second-hand home trades in Beijing still fall under existing tax rates and regulations, which do not levy the 20 percent tax on home sale profits. Many home-owners are selling up before the tax takes effect.

"I came to see which scheme to sell my home is more advantageous for me. I would of course hope that the buyers will pay for the future profit taxes."

Market sentiment indicates that the newly imposed taxes will push up home prices, as sellers mark up their asking price to absorb the tax. Other realtors say, there is still room for home prices to go down.