The Impact Of Second-hand Transaction Tax On Chinese Housing Prices

At the beginning of 2013, "the new five" heavily attacked, compulsorily levying 20%of personal income tax during the second-hand housing traction process, which caused a great disturbance. Firstly, we construct the general equilibrium theory model of second-hand housing market. Through supply and demand balance we find that rising traction tax will lead to second-hand housing price rise, meanwhile the decrease in the volume of tractions of second-hand housing. Moreover, according to the Tax Shifting theory, buyers will bear a greater burden. Secondly, from the equilibrium of supply and demand in the whole real estate market, rising transaction tax will produce crowding-out effect from second-hand housing market to the new, causing the increase of both price and trading volume in new home market. Further, this paper constructs housing as consumption goods and investment goods models. In the former model, increase of traction tax will lead new and second-hand housing prices to rise at the same time, so as the trading volume of new homes, but instead cause the decline of trading volume in second-hand housing market. However, in the later model, increase of traction tax will lead both prices and trading volumes to decline at the same time, whether in the new or second-hand housing market. In this model, traction tax curb prices. Then, by using the panel data of 2003-2012 of China’s 35 large and medium sized cities, empirical results show that right now second-hand housing transaction tax is not so obvious in falling prices, but slowing down the rising extent, which proves that the current real estate market in China is still driven by demand, In the regression results, different districts show different phenomenon. The inhibition of transaction tax on the west is the most obvious, indicating that western market have stronger speculation than the eastern market. As for other factors, the models and empirical results both show that mortgage rates will effectively curb the rapid rise in prices, which is the most obvious in east. In addition, the empirical results also show that the vacant areas, per capital income and housing cost have significant impacts on prices. Finally, the last part of the article give the corresponding conclusions and policy suggestion according to the above models and empirical results. At present, China’s regional divergences are so large that policymakers should control the real estate market effectively through second-hand housing traction, mortgage interest rates and other means according to the local actual situation.