New tax option drives up Dongguan home sales

In March, 2,521 existing homes were sold in Dongguan, more than triple the previous month’s total, after the local government effectively lowered the tax on home sales, reports Caixin Global.

The surge in sales came after Dongguan’s government changed the tax rules for existing home sales on March 11. The change gave sellers the option to pay either a 20% tax on the increase in the value of their property since they bought it — or a 2% tax on the total transaction price. In the past, the sellers of existing homes in Dongguan had no choice other than paying the 20% tax.

The new tax option is better for sellers whose homes have appreciated more than 11.1% in value, according to Caixin calculations. From 2016 to 2018, the average per-unit price of an existing home in Dongguan rose 30.2%.

As China’s economy slows, the central government has softened its tone on regulating the property market and allowing local governments more freedom to adjust restrictions based on conditions in their own local markets.