China to reduce property curbs' side effects

BEIJING - China's latest property market curbs have stirred heated discussion, with experts close to policymakers saying China will try to control the side effects of the measures.

The central government announced last weak that homeowners who sell their homes will have to pay an income tax equivalent to 20 percent of the profits they make on the transaction. The income tax for such sales is currently 1 to 2 percent of the sale price.

Qin Hong, a researcher with the Ministry of Housing and Urban-Rural Development (MOHURD), said those who sell their only home after five years of use will be exempt from paying the tax.

She said the tax exemption will support reasonable housing demand and help to control speculation.

Jia Kang, a researcher with the Ministry of Finance, said local governments should make clear regulations in accordance with the policy and prevent non-speculative buyers from being hurt by the tax hike.

Shortly after the new policy was issued, home buyers rushed to buy or sell second-hand homes over fears that the tax hike would increase transaction costs.

On the first day after the measures were announced, sales of second-hand homes in Beijing reached a record high of 1,059 units.

Hu Jinghui, vice-president of www.bacic5i5j.com, a leading property brokerage firm, warned that the increased costs may be shifted to home buyers over the long term.

Qin said the shift will depend on housing supply and demand.

She said that in a buyer's market, a tax shift would be relatively hard, while in a seller's market, where supplies of second-hand homes are limited, it will be much easier for sellers to put the increased cost on buyers.

Shen Li, a broker with HomeLink, another property brokerage firm, said her company puts second-hand home transaction taxes on buyers instead of sellers.

Jiang Weixin, minister of MOHURD, said Monday that the ministry will wait to see what effects the new measures will have, adding that he is confident that housing prices will be  contained.

Qi Ji, vice-minister of MOHURD, said Monday that if the measures create problems during implementation, authorities will adjust them in a timely manner.

In response to complaints that repeated property cooling measures over the last decade have had little effect, Qin said prices would be even higher without the government curbs.