Property tax trial will be extended across mainland

Move to expand the curb beyond Shanghai and Chongqing is another sign Beijing is determined to cool the housing market

PUBLISHED : Saturday, 22 September, 2012, 12:00am
UPDATED : Saturday, 22 September, 2012, 3:30am

Despite fewer cities recording a rise in home prices last month, Beijing will expand a property tax trial in Shanghai and Chongqing to cover the whole country.

The move is another sign that the government is determined to cool the housing market.

Cong Ming, an official with the State Administration of Taxation's policy and regulation department, said property tax reforms would be broadened as early as late this year, suggesting that more cities would impose the tax, according to the state-owned China Securities Journal.

Cong didn't name any cities but insisted the tax would eventually take effect nationwide.

"In the next step, we will aim to expand the trial run of the tax and establish a system of property-related taxes," Cong said.

Shanghai and Chongqing became the first two cities to impose a property tax in February last year, part of Beijing's efforts to curb the red-hot market.

The central government said the tax would be introduced in other cities but did not give a timeframe.

In Shanghai, a 0.6 per cent tax on second homes has been implemented, while Chongqing levies a 0.5 per cent to 1.2 per cent tax on new luxury properties.

Tighter measures on the property sector, including the property tax and restrictions on purchases, helped cool the market, and there was speculation in June that Beijing would loosen policies to bolster the slowing economy.

The housing market has shown signs of taking off again since June, with surging sales and increasing prices.

But top officials including Premier Wen Jiabao have reiterated that Beijing would continue its clampdown on the housing market.

In July, the National Bureau of Statistics said 50 cities reported increases in home prices.

The bureau publishes a monthly report of home prices in 70 major cities.

Last month, 36 cities recorded higher prices, compared with 50 in June, easing pressure on the government to take new steps to cool the market.

Cong said the property tax was targeted not only at curbing speculation but at fine-tuning the existing property tax regime.

Some analysts said the tax reflected Beijing's intention to raise more money given the slower economy.

Policymaking on the property sector has long been surrounded by suspicions, with developers and homebuyers questioning the efficiency of tightening moves.

"Home prices are decided by the market," said Sun Hongbin, chairman and chief executive of Sunac China Holdings, a Tianjin-based developer. "Nobody is able to control the home prices."