Chinese property stocks hit by talk of real estate tax

Report of officials from over 30 cities being prepared for new regime sends shares down in key companies

PUBLISHED : Wednesday, 15 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 1:33am

Mainland property stocks fell yesterday on speculation that the central government will implement a property tax in more than 30 cities.

The Economic Information Daily, a newspaper owned by Xinhua news agency, reported on Monday that the State Administration of Taxation is conducting a six-month course on how to evaluate property tax and officials from local taxation bureaus in more than 30 cities were taking the programme.

The course is widely believed to be preparing officials for the property tax. The authorities will continue to hold the course for two years, the report said.

Shares in Greentown China Holdings fell 3.9 per cent to close at HK$7.88 yesterday while Evergrande Real Estate dropped 3.2 per cent to HK$3.33.

Sino Ocean Land and Shimao Property Holdings lost 2.65 per cent and 1.73 per cent, respectively.

Alfred Lau, property analyst at Bocom International, the investment banking unit of Bank of Communications, said mainland property stocks have been softening since last month as the market has been concerned that the central government might introduce new curbs.

"The mainland government will impose the property tax sooner or later. It has already done so in Shanghai and Chongqing but that didn't bring down property prices," he said, adding restrictions on buying second homes have had a much greater impact than property tax.

He said he believed the central government was unlikely to introduce any drastic new measures in the property sector ahead of the once-in-a-decade leadership change later this year. "They will only implement the existing measures more strictly."

Du Jinsong, research analyst at Credit Suisse, said another factor that affected the stocks was the poor property sales last month.

"The market expected mainland developers to record strong property sales in July. However, the figures last month were worse than June's," he added.

Greentown China sold a total gross floor area of about 213,000 square metres in July, 48.6 per cent less than in June. The monthly sales of Longfor Properties slumped 32.4 per cent to 3.07 billion yuan (HK$3.76 billion) last month, while Shimao Property Holdings' sales fell 33.42 per cent to 4.02 billion yuan.

Du said sales slowed as developers have begun to raise prices. He expected sales to stay at low levels this month but said they would rebound next month as more new residential projects hit the market.