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The Shanghai government announced new tax incentives to help low-income families buy homes, but critics are suggesting the criteria to be eligible are too stringent, meaning few will benefit from the program.
The policy will offer tax credits worth up to 10 percent of a property's value for low-income buyers of apartments costing less than 250,000 yuan (US$30,120), or those smaller than 90 square meters and priced below 3,500 yuan per square meter.
The incentives are valid for homes bought between June 1, 2003 and May 31, 2008, according to a statement posted on the city government's Website.
While the statement didn't say exactly how the plan would work, industry analysts said the government would offer income tax credits to low-income buyers to cover the interest payments on their mortgages.
Drafted by the Shanghai Housing and Land Administrative Bureau and the Shanghai Finance and Taxation Bureau, the credits will only be available to families with an annual per-capita income below 13,250 yuan.
Critics, who said a previous policy helped the rich more than the poor, say the new policy won't be of much help to many due to the stringent criteria.
"It's wise for the government to try to balance the benefits to the rich with those of average wage owners," said Yin Kunhua, a professor at Shanghai University of Finance and Economics. "But the limits announced this time seem quite low, allowing a very small group to enjoy (the benefits)."
Yin did agree, however, that such a policy is needed as the city's booming real estate market "offers chances for investors but fails to meet the demands of common families."
At the end of May, the city halted a five-year program that had offered tax credits to any new homebuyer in the city.
Since the plan allowed buyers to get a 20 percent credit for the cost of their homes to use against their income taxes, critics said the rich benefited far more from it than the low-income families it was supposed to help.
That plan has received a great deal of credit, however, with helping develop the city's young property market.
While average disposable incomes hit 7,400 yuan per capita in Shanghai during the first half of this year, one of the highest in the country, salaries are not keeping up with the city's skyrocketing housing prices.
By the end of last year, Shanghai's average housing price had reached 4,553 yuan per square meter, while some government figures have indicated an up to 30 percent price hike this year.
Those numbers mean an average local family can expect to spend 20 years' worth of savings to buy a 100-square-meter apartment.
Local property agents say the new policy could boost trading of small apartments built during or before the 1980s.
"One-bedroom apartments are sought after in the second-hand housing market. The new tax credit may further spur trading," said Yu Jing of Shanghai Stanford Residential Property Services.
To meet demand from common families and ensure social stability, the city government has been encouraging developers to build more affordable homes.
Over the next three years, 3 million square meters of budget homes will be put onto the market annually, adding to the 1 million square meters of affordable housing - meaning apartments priced under 3,500 yuan per square meter - under construction this year in the city.
(Shanghai Daily November 4, 2003)
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