Chinese Local Governments' Follow-Up Property Curbs Aren't Fazing The Market

beijing property

A month ago, China announced property curbs including a 20 per cent capital gains tax on home sales, that slammed Chinese stocks, and property stocks in particular.

Now, a bunch of local Chinese governments including Beijing and Shanghai have announced a follow-up to those measures.

First, here’s a look at the announcements, via Xinhua. Big cities will carry out the 20 per cent capital gains tax on property sales.


  • Single adults with a Hukou (residency permit) for Beijing, and who have not bought homes before, can buy one apartment.  
  • Down payments for second-home buyers will be raised.
  • A homeowner will only be exempt from the 20 per cent capital gains tax if he/she is selling the only home they own, and if he/she has owned it for five years or longer.
  • Those who forge documents to purchase apartments ” will not be registered for property ownership and will be banned from buying apartments in Beijing within 5 years.”


  • Banks are banned from approving loans for homeowners looking to buy their third home or more. 
  • Down payments for second-home buyers will be raised.
  • Borrowers from other cities, foreigners, and borrowers that are divorced will face “greater scrutiny.” [If the latter seems strange, it is because Chinese couples get divorced to take advantage of tax loopholes.]


  • The rate of growth in home prices will be maintained at a pace that is slower than per capita income growth.
  • Pre-sell permits will be suspended in the case of overpriced houses or those with surging prices.

These property curbs are thought to be lacking in specifics, and inadequate in cooling home prices. Bank of America’s Ting Lu writes that these follow-up measures are less strict than the markets had expected. 

In terms of the policies for both cities, he writes that Beijing’s restriction on home purchases is a bit of a surprise. Beijing however accounts for 4.5 per cent of China’s new home sales and therefore the “impact will be quite limited.” Moreover, many of the smaller cities like Hefei and Dalian didn’t even mention the 20 per cent tax.

From Lu:

“The ‘detailed measures’ announced by local government this weekend reflect a tug-of-war between the local and central government (especially the previous one).

Under China’s tax system, local governments get only 40% of capital gains tax on home sales but will bear the full brunt of falling land sales and other property-related tax, so they have little incentives in implementing overly restrictively property tightening measures including the 20% capital gain tax. We will perhaps have to wait for more details on 20% capital gain tax from the State Tax Bureau.”

He expects that new home sales won’t see a huge impact from these measures and existing home sales already surged in March to avoid the tax, these should slow in April. 

The governments preferred method of lowering home prices seems to be through increasing land supply as we have previously reported.

Chinese property stocks seem to be celebrating the news, with the SHPROP rising as much as 2.43 per cent today.

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