Shenzhen’s housing and construction bureau announced on Monday that all residential apartments smaller than 144 square meters in the southern city will be exempted from the luxury home tax.
The move is expected to boost the city’s secondary home market.
Shenzhen started imposing the luxury home tax in 2015. The definition varies from district to district.
In Luohu, for example, a residential apartment priced above 3.9 million yuan (US$555,781) in considered a luxury home, while it begins at 4.7 million yuan in Futian and 4.9 million yuan in Nanshan.
Homebuyers need to pay a 5.6 percent tax based on the difference between the selling price and the official threshold.
Longgang, Guangming New District and Pingshan New District set the bar of luxury homes at much lower levels of 2.8 million yuan, 2.5 million yuan and 2 million yuan respectively.
However, home prices have nearly doubled since 2015, and the municipal government has yet to update the tax rule.
Currently, over 80 percent of newly transacted apartments are subject to the luxury home tax.
Some homebuyers are required to pay the tax even if they only buy a tiny apartment with an area of 35 square meters.
The latest move can be viewed as part of the Shenzhen government’s efforts to catch up with the latest market situation.
While owners, developers and agents welcome the change, the relaxation is more drastic than expected.
Based on the new rule, an apartment costing more than 17 million yuan may still be exempted from the tax.
Dubbed as China’s Silicon Valley, Shenzhen does not lack well-paid technology talents, some worry that the move may only widen the wealth gap in the city.
This article appeared in the Hong Kong Economic Journal on Nov 12
Translation by Julie Zhu
[Chinese version 中文版]
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