Open Source Securities: Multiple departments release announcements to increase tax incentives, promoting the improvement of housing demand.

Open source securities released a research report stating that the announcement by the three departments continued the loose real estate policy direction since the end of September. It is a specific explanation of the improvement of the real estate tax system proposed at the Third Plenary Session of the 20th Central Committee, and the financial and tax policy support for the real estate market is accelerating implementation. Increasing the stamp duty discounts on housing transactions, decoupling VAT standards for ordinary homes in first-tier cities can reduce home buying costs, and the unified downward adjustment of the land appreciation tax prepayment rate can alleviate the financial pressure on real estate enterprises. The announcement stabilizes market expectations from both buyers and real estate developers, promoting market stabilization. Event: Three departments issue announcement on tax policies related to promoting the stable and healthy development of the real estate market On November 13, 2024, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Housing and Urban-Rural Development issued an announcement on tax policies related to promoting the stable and healthy development of the real estate market, specifying multiple tax incentives supporting the development of the real estate market, including increasing the stamp duty discounts on housing transactions, actively supporting residents' rigid and improvement housing needs; lowering the lower limit of the land appreciation tax prepayment rate to ease financial difficulties for real estate enterprises. The new policy will take effect from December 1, 2024. Key points from Open Source Securities include: Increase stamp duty discounts on housing transactions to support residential improvement needs In terms of stamp duty, the announcement has raised the area limit for enjoying stamp duty discounts from 90 square meters to 140 square meters, and lowered the stamp duty for second homes in first-tier cities to 1% (up to 140 square meters) and 2% (above 140 square meters). The stamp duty policy has a wide coverage, which will further reduce the tax costs for residents buying homes, promoting the release of demand for improved housing. For first-tier cities, the stamp duty discounts are more significant, with the highest reduction reaching 2 percentage points. Decoupling VAT standards for ordinary homes in first-tier cities, and unified downward adjustment of 0.5% for land appreciation tax prepayment rate Regarding VAT, it is clarified that VAT linked to the cancellation of VAT for ordinary and non-ordinary homes in first-tier cities, with a waiver of VAT for individuals selling homes that have been owned for 2 years or more. This policy mainly cancels the 5% tax on the appreciated portion of non-ordinary homes sold after two years, which is expected to further reduce the cost of buying homes in first-tier cities. Previously, Beijing and Shanghai had already made clear their intention to implement national requirements and timely cancel ordinary home standards, with the policy to cancel ordinary home standards in first-tier cities expected to accelerate. In terms of land appreciation tax, for residential properties with an appreciation amount not exceeding 20% of the deducted project amount, the land appreciation tax will still be waived; meanwhile, the minimum prepayment rate for land appreciation tax in various regions is unified to be reduced by 0.5 percentage points, and each region can adjust the actual prepayment rate based on local conditions. For real estate companies subject to land appreciation tax prepayment, this is beneficial for reducing cash flow pressure. After the adjustment, the prepayment rate is 1.5% for the eastern region, 1% for the central and northeastern regions, and 0.5% for the western region. Investment recommendations: (1) Strong credit real estate companies with high investment intensity, optimal regional layout, and market-oriented mechanisms: Poly Developments and Holdings Group (600048.SH), GREENTOWN CHINA (03900), China Merchants Shekou Industrial Zone Holdings (001979.SZ), CHINA OVERSEAS (00688), Xiamen C&D Inc. (600153.SH), YUEXIU PROPERTY (00123), Hangzhou Binjiang Real Estate Group (002244.SZ), C&D INTL GROUP (01908); (2) Dual drive of residential and commercial real estate, benefiting from the real estate recovery and consumption promotion policies: Seazen Holdings (601155.SH), LONGFOR GROUP (00960); (3) Continuous increase in the scale and penetration rate of second-hand housing transactions, with vast prospects for the real estate after-service market: BEKE-W (02423), 5i5j Holding Group (000560.SZ). Risk warning: Policy implementation falling short of expectations, and funding falling short of expectations.