Shanghai to exempt property tax for some home buyers

Shanghai to exempt property tax for some home buyers

Shanghai to Exempt Property Tax for Some Home Buyers

Shanghai has announced adjustments to its real estate policies, including exemptions from property tax for certain home buyers, as part of efforts to stabilize the struggling housing market. The revised measures, effective from August 26, 2025, aim to reduce financial burdens on residents and stimulate demand in a sector grappling with prolonged downturns according to Shanghai government announcement.

The policy changes align with broader national initiatives to address China's property crisis, which has seen major developers like Evergrande Group collapse and home prices decline sharply. A key component of the new rules involves extending a value-added tax (VAT) exemption for residential properties sold after a two-year ownership period. Previously, sellers in cities like Shanghai faced a 5% VAT on homes held for less than two years; this rate has been reduced to 3% under the updated policy. The exemption is designed to encourage longer-term homeownership while reducing transaction costs for buyers.

The adjustments also reflect the government's broader strategy to support housing affordability. In late 2024, Shanghai and other major cities implemented similar VAT exemptions, and policymakers have since emphasized measures such as government acquisition of existing housing stock for affordable housing projects according to Bloomberg reporting. However, analysts note that these steps fall short of more aggressive interventions, such as direct subsidies or cash incentives, which some economists argue are necessary to revive demand.

Historically, Shanghai's property tax policies have influenced housing wealth inequality. A 2011 pilot program introduced property taxes on second-home buyers, which reduced the Gini coefficient for housing wealth by 13.8% in the city. While the current exemptions focus on transaction taxes rather than annual property taxes, they signal continued efforts to balance market stability with social equity.

The effectiveness of these measures remains to be seen, particularly as developers like China Vanke Co. face rising debt challenges. With home prices in Shanghai and other cities still under pressure, the government's ability to restore confidence in the sector will depend on sustained policy support and broader economic reforms.

Shanghai government policy announcement (August 2025): Shanghai government policy announcement (August 2025)
Bloomberg (December 2025): Bloomberg (December 2025)
Property Tax and Housing Wealth Inequality (2024 academic study): Property Tax and Housing Wealth Inequality (2024 academic study)