China's Tax Breaks: A Lifeline for the Property Market

China has introduced new tax incentives for home and land transactions to support its struggling property market. Key measures include expanded eligibility for deed tax and reduced land value-added tax rates, aiming to stimulate demand and assist developers facing financial challenges.

China has taken decisive action to buoy its beleaguered property market by unveiling new tax incentives that target home and land transactions. Announced on Wednesday, these measures are aimed at bolstering demand while alleviating financial pressures on developers.

The finance ministry has detailed these initiatives, following finance ministerial promises for supportive tax policies. Key changes include raising the eligibility for the 1% deed tax on apartments from 90 to 140 square metres, effective December 1. Additionally, a slight reduction in the land value-added tax rate will be implemented. Notably, VAT exemptions will be granted to homeowners selling their properties after two years in major cities like Beijing, Shanghai, Shenzhen, and Guangzhou.

The property sector has grappled with a persistent downturn since 2021, significantly impacting China's economic growth. Recent stimulus measures, such as reduced down payment ratios and eased purchase restrictions, reflect efforts to revive the market. Despite these changes, Moody's Ratings notes that buyer confidence remains low, affected by economic uncertainties and project completion concerns.

(With inputs from agencies.)