BEIJING: China may launch a property tax trial in some cities later this year to stop speculation in the housing market, a property industry group said on May 19.
"It's quite possible that the government will make its first step in launching a property tax later this year," said Nie Meisheng, president of the semi-official China Real Estate Chamber of Commerce. "It's a good way to test the waters and see what kind of reaction people will have before moving on."
Rumours of a property tax have been one factor pushing down property stocks on the mainland and Hong Kong over the past few months.
So far, the tax is most likely to be introduced in Shanghai and Chongqing, officials and analysts said. Chongqing had already submitted plans to the State Council for approval, a local tax official said.
In Shanghai, the local government is considering imposing a property tax of 0.6% of the value of the property for owners of apartments above a certain size and who have lived in the city for at least three years, instead of the 0.8% reported previously, according to market sources.
The number of property deals has fallen by an annual 80% to 90% in first-tier cities like Beijing and Shanghai in the first half of May due to the policies announced in April, property companies say.
Property prices in 70 big cities have risen on a monthly basis since March 2009. In April, prices rose 1.4% from March, but Nie expects prices to start falling from May.
Some industry officials believe prices could again rise later this year, prompting the government to keep rolling out tightening policies until the market gets the message.
"China will continue to tighten its policies as it hasn't seen any price cuts yet," Ke Feng, associate economics professor at Peking University, said.
However, some said it might not be easy to implement the scheme fairly in the beginning.
"If you impose the tax using floor area, that's tough because you've got apartments of different grades," Nie said. "If you impose the tax by valuation, that's going to take a lot of work too as different people might value the property differently." – Reuters
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