March 09, 2013 at 03:00 AM EST
Chinese Housing Market to Take Dip Following New Government Taxes reports FormPaper
(EMAILWIRE.COM, March 09, 2013 ) San Francisco, CA -- Developers in China have seen their shares fall over the week based upon worries of the impact of government measures to take control of housing prices.

The announcement was made last week, and homeowners who sell properties will now have to pay a capital gains tax of 20% of profits, according to the State Council stated last week.

China had previously taxed homeowners only a 1% to 2% of the sales price.

The government has ordered the central bank to raise the down-payments for mortgage lending rates for the buyers of secondary or tertiary homes in particular cities. The government also told local governments to begin limiting the non-residents that are buying homes, keeping them to no more than a single home.

In 2011, the State Council established a minimum down-payment for the second home at 60% of the purchase price as part of the earlier effort to control property prices in general. That issue has become a sensitive one in China, and the authorities have looked to control them over the previous three years, creating measured that include restriction on extra housing purchases, as well as higher minimum down-payments and taxes in cities on multiple non-locally owned residences.

For Ply Real Estates Shares, developer Gemdale plunged by nearly double-digits, and analysts state the new measure have likely dampened sentiment toward the sector. The analyst hope it is a short term turn, but overall they believe homes will take an upward turn in the long-run and overall.

Such policies will always have a temporary, noisy, and negative impact, said Liu Ligang, an economist for Australia and New Zealand Banking Group in Hong Kong.

However, they will not have much lasting impact... long-term demand will not suddenly disappear, he said in a research note, citing Chinas continuing urbanization.

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