SHENZHEN has begun implementing a policy that cancels the sales tax on pre-owned homes sold two or more years after purchase, but the minimum down payment for second homes will remain at 70 percent until further notice, the Southern Metropolis Daily reported Thursday.

    The People’s Bank of China, the country’s central bank, cut the minimum down payment for second homes to 40 percent from 60 percent Monday. In November 2013, Shenzhen raised its down payment requirement for second homes from 60 to 70 percent.

    All major banks in Shenzhen said that they haven’t received any instructions from the city’s bank regulator. “It takes about half of month to implement the policy in a given city. Before that, commercial banks will not deal with new mortgages,” said a manager with China Everbright Bank.

    Some business analysts said the city still has an exceptionally strong demand for properties and that it’s reasonable to maintain the existing down payment ratio.

    The down payment ratio for first-home buyers who use the housing provident fund will be reduced from 30 percent to 20 percent. Shenzhen Housing Provident Fund Management Center said it would announce details in the near future regarding the change.

    “The policy is evidently designed to encourage demand and to improve living conditions,” said Professor Deng Zhiwang from Shenzhen Polytechnic. Homebuyers can save 50,000 yuan (US$8,000) to 100,000 yuan by buying a home priced between 2 million to 3 million yuan after the sales tax is canceled.

    The sales tax policy is expected to shore up the cooling property market in first and second-tier cities, where second-hand housing transactions play an important role in supporting the property market, according to analysts. In addition, the price of new homes will also rise steadily in the future, Deng said.

    “Property developers in third-tier cities will try to digest their currently huge inventories instead of raising prices. The loosened policy will drive up home prices in China’s largest cities,” said Zhou Zhifeng from Jones Lang LaSalle, a real estate services provider.

    After the policy is announced, many property owners increased their home prices. “Seventy percent of home owners who are selling have increased the price by 3 to 5 percent,” said Zhang Jianhua, an agent with Centaline Group in Bao’an District.

    “China’s economy is at a relatively important and critical point in time. Good performance in the property market will support China’s economic development,” said Tan Huajie, managing director secretary of Vanke Group. (Luo Songsong)