Feb. 11 (Bloomberg) -- Wuhu in eastern China will waive a deed tax and subsidize some home purchases, becoming the first city in the nation to ease property curbs this year even as the central government reiterated plans to maintain restrictions.
The mid-sized city in Anhui province will give subsidies of 50 yuan ($7.90) a square meter (10.76 square feet) for the purchase of homes between 70 square meters and 90 square meters, and 150 yuan a square meter for new homes smaller than 70 square meters, the local government said in a statement on its website yesterday.
Wuhu’s announcement may signal more easing of property measures by local governments as prices fall, said Peter Bai, a Beijing-based property analyst at China International Capital Corp. Premier Wen Jiabao reiterated on Jan. 31 that China will maintain real-estate market curbs to bring prices down to a reasonable level. Beijing and Shanghai are among cities that said they will continue to impose restrictions this year.
“Local governments, especially those third-tier cities, rely largely on the property sector for economic growth; they are facing a lot of pressure now,” Bai said. “More cities will follow suit this year.”
The measures in Wuhu are intended meet demand from buyers with low incomes and to attract residents with higher education rather than to bail out the property market, the official Xinhua News Agency reported today, citing comments by Hong Jianping, Wuhu’s deputy mayor, at a media briefing yesterday.
First Time Buyers
Under the new policies, the subsidies will apply to purchases of first homes, Xinhua said. Home buyers with more extensive educational backgrounds or professional qualifications are entitled to higher subsidies, the agency said.
In October, Foshan in southern China’s Guangdong province suspended a decision to ease limits on property purchases less than a day after it said it would allow residents to buy a second home.
It is less “sensitive” for cities not well-known outside China to become the first to start easing property curbs, said CICC’s Bai. Wuhu is home to Chery Automobile Co., the country’s sixth-largest automaker.
The central bank this week pledged support for first-home buyers as a crackdown on property speculation threatens to trigger a slump in the real estate market.
China’s home prices fell for a fifth month in January, the longest losing streak since SouFun Holdings Ltd., the country’s biggest real estate website, started tracking the data on July 2010.
A deed tax usually is 1 percent to 2 percent of the value of a home, according to CIMB-GK Securities Research. On a 90- square-meter (969-square-foot) apartment, the government’s subsidy amounts to an additional 4,500 yuan.
“Policy relaxation from local governments came faster than expected and the next step for them is to ease the implementation of home purchase restrictions,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research, in a note to clients yesterday.
--Bonnie Cao. Editors: Andreea Papuc, Joshua Fellman
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