Guolian: Tax incentives implemented to boost real estate transactions, easing pressure on property developers.

Guolian released a research report stating that the preferential treatment of deed tax and value-added tax has a positive effect on the transaction activity in the real estate market, promoting the stabilization of the real estate market; the adjustment of land value-added tax can ease the cash pressure of real estate enterprises and improve their profit margin levels. It is suggested to focus on key layouts in first-tier and core second-tier cities, promote improvement-oriented products, and focus on real estate enterprises with continuous land acquisition capabilities, as well as those benefiting from continuously favorable policies, increasing activity in both the primary and secondary housing markets, and possessing core competitiveness in real estate agency platforms. Industry events: On November 13th, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Housing and Urban-Rural Development issued a notice regarding tax policies related to promoting the stable and healthy development of the real estate market, involving deed tax, value-added tax, and land appreciation tax. Key points from Guolian are as follows: Lowering the deed tax rate further reduces the cost of buying a house The Ministry of Finance and other three departments have released a new deed tax policy: For families buying their only residential property with an area of 140 square meters or less, the deed tax rate is 1%, and for properties with an area above 140 square meters, the rate is 1.5%. For families buying a second residential property, the rates are 1% and 2% respectively. This policy adjustment not only raises the area standard for the 1% tax rate from 90 square meters to 140 square meters, but also lowers the tax rate for the second property, reducing the cost of purchasing a house for both essential and improvement-oriented housing, which is expected to boost demand. Unified residential value-added tax releases improvement-oriented demand According to the announcement, after canceling the standard for ordinary residential and non-ordinary residential properties in first-tier cities, the same second-hand property value-added tax policy applies as in other parts of the country: individuals selling property they have owned for 2 years are exempt from paying value-added tax. At the end of September, Shanghai and Shenzhen adjusted the exemption period for personal residential property value-added tax from 5 years to 2 years, further reducing the related value-added tax after canceling the standard for ordinary residential properties. The bank predicts an increase in activity in the second-hand housing market and the release of improvement-oriented demand. Lowering the minimum pre-tax rate for land appreciation tax to ease cash pressure Taxpayers who construct standard ordinary residential properties for sale and their appreciation does not exceed 20% of the deduction amount are still exempt from land appreciation tax. In cities that have canceled the standards for ordinary residential and non-ordinary residential properties, the scope of exemptions has been expanded, improving the profit margins of real estate enterprises, especially those with a high proportion of non-ordinary residential projects. The minimum pre-tax rate for land appreciation tax has been lowered by 0.5 percentage points. After the adjustment, except for affordable housing, the minimum pre-tax rate for provinces in the eastern region is 1.5%, the central and northeastern regions are 1%, and the western region is 0.5%. Lowering the pre-tax rate can reduce the upfront cash outlay for real estate enterprises in the project, easing current liquidity pressures. Investment advice It is recommended to focus on key layouts in first-tier and core second-tier cities, promote improvement-oriented products, and invest in real estate enterprises with a continuous land acquisition capacity, such as GREENTOWN CHINA (03900), C&D INTL GROUP (01908), Hangzhou Binjiang Real Estate Group (002244.SZ), etc.; Focus on real estate agency platforms that benefit from continuous policy support, increasing activity in both primary and secondary housing markets, and possessing core competitiveness, such as 5i5j Holding Group (000560.SZ), etc. Risk warning: Policy effects do not meet expectations; increased liquidity risks for real estate enterprises; market confidence falls short of expectations.