Shanghai’s Real Estate Tax Reductions: A Revival Strategy?

Shanghai has declared a tax reduction on real estate transactions, effective December 1, in a bid to support its struggling property sector. The city’s efforts are part of a larger national strategy to revive the market, which includes increasing demand and easing financial constraints for developers.

Increased indices for China’s real estate and Hong Kong-listed mainland developers reflect market optimism. Shanghai’s reforms will remove the distinction between ‘ordinary’ and ‘non-ordinary’ housing for tax purposes, exempting residents from VAT on properties held for over two years. The threshold for deed tax on larger properties has also been adjusted.

Despite these measures, Shanghai’s resale prices have been in a downward trend for 16 months, raising doubts about the immediate effectiveness of these tax cuts. Social media reactions are mixed, with experts advocating for broader economic policy adjustments to secure a sustained recovery in the housing market.

(With inputs from agencies.)