On Oct 22, the Finance Ministry, the State Administration of Taxation and the Central Bank synchronously promoted a series of new policies aiming at stimulating affordable mass-market housing and improving the social security system.
Doubts and Responses
However, the clamor for lower housing prices is still strong throughout the whole country. Then is it rational to save the RE industry at the risk of even higher market prices?
The real estate industry plays an important role in China’s economic growth, with a 10% proportion of the total GDP. We cannot imagine how the life will be if economic disasters happen. So there is no doubt that the measures to stimulate the RE industry are rational, even they may bring up the market prices again and gain the risk of bubbles in RE.
Analysis and Demonstration
Firstly I will analyze the recent policies within two aspects: the Taxation and the Loans.
On Oct 22, the Finance Ministry announced the reduction of the house buying tax and the exemption of the stamp tax on property purchase and the value-added tax of land on property sales. The purpose is increasing the residents’ disposable income, in order to stimulate the confidence in house-buying. This is an essential step to increase the demand in RE market.
The core policy this time is the decrease in the loan rate and the threshold of down payment. The government’s purpose is to encourage those people who want to buy houses first time. Obviously, this measure will help the RE firms in some ways, that is, the demand may increase as mentioned above.
After analyzing the fiscal and monetary policies, we can see that the government is trying to recover the residents’ confidence in house-buying. China’s RE industry has a golden period in the recent years, which develops greatly both in scale and style. However, problems burst out following the development. The most concerned conundrum is that the rapid increase in housing price usually...