Beijing, Shanghai announce detailed property curbs; The two mega-cities both vow to strictly implement the 20-percent tax on capital gains from property sales

Beijing, Shanghai announce detailed property curb   2013-03-30

BEIJING, March 30 (Xinhua) — The municipal governments of Chinese capital Beijing and business hub Shanghai on Saturday spelled out detailed rules aimed at cooling the property market following the central government’s fresh regulatory plan earlier this month.

Single adults with a permanent Beijing residence registration, who have not made purchases in the city before, are allowed to buy only one apartment, according to the announcement.

Shanghai said banks will be banned from giving loans to local residents who are buying a third apartment or more, according to a government announcement.

Meanwhile, the two cities will raise down payments for second-home buyers.

The two mega-cities both vow to strictly implement the 20-percent tax on capital gains from property sales.Beijing said the tax will be exempt if the property is the seller’s only one and they have owned it for five years or more. The Shanghai announcement did not mention similar policy.

Other rules include ensuring land supplies for residential housing, enhancing regulations over property sales, and building a long-term mechanism for the housing market.

Beijing said it will complete construction of 70,000 units of affordable apartments in 2013. Shanghai targets completion of construction of 10,000 units of such apartments this year.

Shanghai said besides enforcing the capital gains tax, it would apply greater scrutiny to borrowers who come from other cities, or are foreign or divorced.

Beijing said those who provide fabricated materials to buy apartments will not be registered for property ownership and will be banned from buying apartments in Beijing within 5 years.

The rules came after the central government rolled out a plan on March 1 to tighten control over the property market amid expectations of rising housing prices.

Among the measures, the central government announced a new capital gains tax of 20 percent on used home transactions, a move that has triggered widespread panic among both buyers and sellers. The new tax replaces the previous transaction tax of 1 to 2 percent of the final sale price.

The property market, particularly the used house sector, has since seen a large number of transactions amid worries that the new tax will push housing prices even higher.

“The curbing policies are designed to optimize the allocation of housing resources,” said Chen Zhiwu, secretary general of the Beijing Real Estate Association.

The target of policy regulation is to make the housing return to its nature of residence, instead of investment object, Chen said.

The impact of buying control and differentiated credit policy will be limited but it will help stabilize the market expectation, said Zhang Dawei, chief market analyst with Beijing-based Zhongyuan Real Estate.

Home buyers are eager to purchase houses because they expect a rising real estate price. The new rules will cool the property market, and help bring down the price to a rational one, Zhang said.

The rules caught the public’s eye as soon as it came out.

Li Yu, a 27-year-old while collar, said most single adults who have a proper job cannot afford to buy a house in Beijing.

The average price of Beijing’s used house reached 25,475 yuan (4,101 U.S. dollars) per square meter by the first half of January, according to a survey done by Bacic5j5j Group.

Like many of her colleagues, Li rushed to buy a house this month before property curb measures were detailed.

On March 22, She bought a 57-square-meter house near Beijing’s Second Ring Road for 2.15 million yuan. “Even the tax was as high as 100,000 yuan,” said Li.

“I don’t think the rules can impose any restrictions on those who have two or more houses. And those who in need of a house still cannot afford one,” she said.

Li Wenjie, director of Beijing Real Estate Agent Association, said the rules may be effective in the short term, but increasing land supply and collecting property tax from house owners can yield better result.

“The purchase limit policy will not last forever. It should be replaced by long-term effective measures,” said economist Ma Guangyuan.

Beijing, Shanghai vow to enforce new property cooling measures

Sat, Mar 30 2013

BEIJING (Reuters) – Beijing and Shanghai will implement strict property cooling measures as part of a central government crackdown on the overheated property market, Xinhua said on Saturday.

The move comes as the central government faces renewed pressure to stabilize skyrocketing home prices in several major cities.

Under the new measures, single Beijing residents will be prohibited from buying second homes, Xinhua said.

The central government said earlier this month that in areas where property prices are rising too quickly, local governments must strictly enforce a 20 percent capital gains tax and higher down payments for second-home buyers.

Beijing’s municipal government said the tax could be waived if the family only owns one home and has lived in it for more than 5 years.

Shanghai municipal government said in addition enforcing the capital gains tax, it would apply greater scrutiny to borrowers who come from other cities, or are foreign or divorced.

The new rules will take effect March 31, Xinhua said.

China’s southern province of Guangdong said on Tuesday it would work to implement the same directive, singling out four cities including Guangzhou and Shenzhen, which have also seen home prices rise rapidly compared with other urban centers.

On a population-weighted basis derived by Reuters from official data, Beijing home prices jumped 21.8 percent in February compared with a year earlier. Shanghai home prices were not far behind, gaining 14.6 percent during the same period.

Year-on-year prices for new homes in China rose in February for a second consecutive month.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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