Beijing considers property tax to curb home market
The central government has issued a fresh warning that it will roll out a property tax trial across the nation to rein in any sharp rises in home prices.
In the latest sign that it remains determined to keep the lid on prices, the State Council announced yesterday after a meeting chaired by outgoing Premier Wen Jiabao that it would stick with austerity measures to ensure healthy growth of the housing sector. The warning comes in the wake of recent price rises.
Among the measures the cabinet warned it would take was the expansion of a property tax, presently implemented only in Shanghai and Chongqing on a pilot basis, to other cities.
The announcement has been interpreted as a "letter of intent" rather than a substantive policy, since it was speculated that Beijing would order banks to restrict their issuing of mortgage loans following the meeting.
The statement on the expansion of property taxes echoed remarks from the state tax authorities in September last year that cities such as Beijing would follow in the footsteps of Shanghai and Chongqing, which began charging new home buyers a tax ranging from 0.5 per cent to 1.2 per cent in February 2011.
"It was a clear message that the property tax would be expanded within this year," said Yang Hongxu, the chief researcher at E-House (China). "It's not easy to speculate which cities will do so."
Yang said all first-tier cities and those second-tier cities that recorded rapid growth in home prices recently would begin imposing the property tax soon.
The red-hot property sector has been seen as an "enemy within" by the state government in the past three years as officials were spooked by fears that a collapse of the home market could cripple the economy and leave banks to rue fresh bad loan problems.
The warnings follow a rush by home buyers to conclude deals during the Lunar New Year holiday, with transaction values in some cities including Beijing more than doubling from a year ago.
Any potential tightening policy by Wen's cabinet to crack down on an overheated property market would put the next government, to be headed by Vice-Premier Li Keqiang , between a rock and a hard place, analysts said.