Shanghai announces new policies to stabilize home market

Shanghai has announced a batch of tightening policies in its latest bid to stabilize the property market which has been seeing growing signs of overheatedness.

Effective today, the number of homes owned by people who have been divorced for less than three years will be calculated based on what it was like when they are married, the city’s housing authorities, as well as a number of government watchdogs, said late yesterday in a joint statement.

Under the city’s current home purchase restrictions, local families are allowed to purchase two residential units at most while non-local families are entitled up to one home.

For example, if a couple owned two homes before their divorce, than any one of the divorcees will not be allowed to purchase a home within three years of their divorce.

Meanwhile, a capital gains tax on the total sales price of the property will be imposed if the house is sold within five years of purchase, up from the previous two-year barrier.

For homes owned for longer than five years, the seller will be charged a capital gains tax on the profit if the property is defined a “non-ordinary” one and no capital gains tax will be imposed if it is an “ordinary” home.

In Shanghai, normal homes are those no larger than 140 square meters and priced at less than 4.5 million yuan (US$695,045) within the Inner Ring Road, or below 3.1 million yuan if between the Inner and Outer Ring roads, or below 2.3 million yuan if beyond the Outer Ring Road.

At the same time, Shanghai will continue to increase land supply for commercial housing development in five outlying “new cities,” namely Nanhui, Songjiang, Jiading, Qingpu and Fengxian, as well as in rural areas close to Metro stations, according to the statement.

To further optimize its “lucky draw” mechanism implemented in new home sale, the statement said that people owning no homes will be prioritized to participate in the first-round lucky draw while those already owning a home will get access to the second round.