Many owners of luxury apartments, commonly referred to as
"non-regular" residential properties in Shanghai, have raised their
selling prices to cover the new land appreciation tax (LAT) that
came into effect last Sunday.
According to the announcement from Shanghai tax bureau, sellers
are required to pay a 0.5 percent tax on the transaction amount if
they have retained non-regular residential properties for less than
three years, and 0.25 percent on properties retained for more than
three years but less than five years. Sale of properties retained
for more than five years is not subject to this tax.
Analysts said LAT does not seem to have achieved its designed
objective of discouraging excessive speculation because the burden
of the tax has largely been passed onto the buyers.
Because of the strong demand for luxury properties, the impact
of LAT on the property market is seen by property agents and
analysts to be limited.
"Many sellers don't mind the tax because they have already
raised house prices," said a salesman surnamed Zhou at Shanghai
Centaline Property Agency Co Ltd.
"It's a sellers' market, the demand is huge. Some second-hand
house owners are even holding the houses and waiting for the prices
to go further up," said Mao Zhi, a professor at China Real Estate
Index Research Academy.
"Most buyers have no problems with the added tax. The LAT for a
2 million yuan property amounts to only 10,000 yuan, not a large
amount compared with the total transaction value," said a salesman
at Shanghai Jiuyu Property Agency Co Ltd.
"The maximum LAT in Shanghai, at 0.5 percent, is lower than the
1 percent tax in Beijing. Thus, the impact is comparably modest,"
said a recent report from Colliers, a leading international real
estate service provider.
There is no LAT in other Asian cities such as Hong Kong and
Singapore. Sellers in Hong Kong do not have to pay capital gains
tax while only non-resident sellers in Singapore need to pay a
withholding capital gains tax ranging from 5 to 15 percent from
sales of property retained for less than three years.
Statistics from Shanghai Existing Property Index Office show
prices of pre-owned houses covering over 70 percent districts in
Shanghai rose 3 percent in June from May.
"The sales transaction volumes of Shanghai residential
properties have been relatively steady since last year, and we have
seen a high level of end-user demand in the market," said the
Colliers report.
(China Daily July 17, 2007)
