China’s State Council will expand property-tax reform trials to more areas and start taxing residential property owners, official news agency Xinhua reported.
The plan, approved by the National People’s Congress Standing Committee, China’s top legislative body, is designed to guide rational property buying and will last for five years, according to the report. We are not sure of the locations or number of trials that will take place.
China’s property prices have shot up to unaffordable heights since 1998 when private home ownership was allowed. Since then, the government has been fighting to stop speculators. Chongqing and Shanghai started property tax trials in 2011. They impose annual fees on homes that are second- or higher priced.
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Individual residences are not currently subject to tax, as per a 1986 law. Commercial properties, however, have an annual tax. Developers are the main source of income for local governments, with a combined total amounting to 8.4 trillion yuan ($1.3 billion) in last year’s revenue.
Experts in the industry say that details are still unclear about the plan.
“We don’t know yet what the differences will be in this plan than in the current trials in Shanghai and Chongqing, but it’s likely to have something new,” said Liu Yuan, vice president for property research at Centaline Group. “The government may not want to make all the details public immediately for the sake of expectation management. But I think this aims at hedging the ongoing property-market supportive measures so home prices won’t rebound again.”
China’s new-home prices fell for the first time in six years and sales plunged 16.9% in September from a year earlier, as the country’s second-largest real estate developer, Evergrande Group, plunged into a debt crisis, which led to a property slowdown nationwide.
Bloomberg reported that the country has relaxed restrictions on loans for home at its biggest banks. Bloomberg published this report on October 15.
–With assistance from Jacob Gu.