Second-hand Property Market Seeing Signs of Recovery; SOE Developers Book Better Sales In September
New home sales of 73 cities around the golden week dropped 29% yoy, and we did a detailed study on the Shanghai market. Transaction volume of second-hand homes in major cities grew by 50% yoy, showing signs of recovery. On 30 September, the government introduced partial or 100% refund on personal income tax from property transactions, which may further help the sales recovery. Maintain MARKET WEIGHT. Downgrade CIFI to HOLD on tightening liquidity.
• Minister of Finance introduced a refund on personal income tax from property transactions.
• CREIS published sales data of major cities for the 41th week of 2022.
• CREIS published Sep 22 contracted sales of Top 100 developers.
• New home sales around National Day holiday were weak. For the 41st week of 2022 (3-9 October), new home sales of 73 cities declined 68% wow and 29% yoy. In Tier 1/Tier2/Tier 3&4 cities, new home sales dropped 77%/69%66% yoy respectively. Among the major cities, outperformers include Chengdu (+37% yoy), Hefei (+29% yoy) and Dongguan (+28% yoy).
• Secondary home market seeing signs of recovery. According to Beike, during 1-7 October, 50 cities reported a 54% yoy increase in number of transactions. Outperformers include Dongguan, Chengdu, Xiamen, Foshan and Suzhou.
• Government introduced tax refund on secondary home transactions. The Ministry of Finance and National Tax Bureau announced on 30 Sep that residents who buy new homes within one year after selling old homes will get part or 100% of personal income tax refunded, effective from Oct 22 – Dec 23. Personal income tax on property transaction can be charged as either: a) 1-2% of transaction value, or b) 20% of capital gain. We conducted a simple scenario analysis on the impact of the tax refund. For a 5-30% capital gain and 80-100% new home value as a percentage to old home value, the tax refund is equivalent to 0-3.7% of the transaction value of the old homes. Thus this tax one-off tax refund will help reduce transaction cost and may serve as a good incentive.