Property tax plan to ensure housing affordability
China will launch a property tax pilot plan in selected regions as the country proceeds with its legislature and reforms to promote the stable and healthy development of its overheated real estate market.
The Ministry of Finance and the State Taxation Administration will draft the relevant measures and regulations for piloting the property tax, and make preparations for the work as per procedure in accordance with the authorization of the Standing Committee of the National People's Congress, Xinhua news agency reported on Saturday. It cited interviews with officials of the two state organs.
The State Council, or China's cabinet, will select the first regions and timing for implementing the trial, which will cover both the land and structure, including residential and commercial real estate.
Legally-owned rural homes will be exempted from the pilot program, which will last for five years, according to Xinhua.
"The launch of a pilot program means local governments will be able to roll out the property tax plan quickly," said Lu Wenxi, a senior researcher at Shanghai Centaline Property Consultants Co. "This is again a clear signal from the central government that it will stick to its repeatedly emphasized principle of 'housing is for living in, not for speculation.'
"Though it is hard to say how large its impact would be until further details including the rates are released, it will surely have a certain psychological impact on the general public particularly 'property speculators' in regions seeing soaring real estate prices."
The latest move by the central government to cool down home buying fever and rein in runaway property prices comes a decade after trial operations in two of the country's populous municipalities.
Since late January 2011, Shanghai has imposed a residential property tax of either 0.6 percent or 0.4 percent, depending on the home price, on purchases by local families who already have one or more homes.
The tax, which also applies to newly-bought homes by non-local families, is waived if per capita floor space is less than 60 square meters.
Chongqing in southwest, meanwhile, also started to tax high-end homes at between 0.5 percent and 1.2 percent from around the same time.
A slew of new tightening measures have been implemented in China over the past two years as the central government remains unwavering to address soaring property prices that have reduced housing affordability rapidly for ordinary wage earners.
Major policies include the "three red lines" scheme to limit developers' debt ratios, trimmed loan exposure of state-owned lenders to the real estate sector, capped mortgage lending at large Chinese banks, as well as raised mortgage rates for home buyers in some regions.