China revives efforts to roll out property tax to rein in runaway home prices, after two-year silence
- A high-level meeting signals the much-anticipated residential property levy is back on Beijing’s agenda, according to industry experts
- It comes after the central government highlighted the unaffordability of homes as a ‘difficulty’ in Premier Li Keqiang’s work report in March
The Ministry of Finance said it had attended a high-level meeting with the Budget Commission of the Standing Committee of the National People’s Congress, the Housing Ministry and the State Taxation Administration to solicit opinions from city representatives, experts and scholars on a pilot scheme for implementing the real estate tax.
It did not disclose more details about the meeting in a statement issued late on Tuesday on its website. There had been no official mention of the plan over the last two years.
“The four authorities that participated in the meeting are the four that will be involved in implementing the property tax, from the one responsible for legislation to the one that will collect the tax,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute. “The signal is strong enough that it is very likely that the tax will appear within the [current] five-year plan period by 2025.”
“We will keep the prices of land and housing, as well as market expectations, stable,” Li said in the report to China’s legislature in Beijing. “We will address prominent housing issues in large cities [and] make every effort to address the housing difficulties faced by our people, especially new urban residents and young people.”
“[The tax] could come within a year or two, considering the crazy speculation in cities like Shenzhen, where the home prices have increased too fast,” Yan added.
In March, China omitted mention of the property tax in its 2021 legislative plan for a second consecutive year as the government focuses on boosting consumption to cement an economic rebound. The legislation remains in the country’s economic development plan for 2021-2025.
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“First-tier cities like Shenzhen are likely to be targeted as home prices remain high,” said Andy Lee, chief executive for southern China at Centaline Property Agency, which has 1,500 branches in the country.
“In our view, any wide-reaching tax regime change is likely to take a number of years to implement nationwide, so its contribution to the stabilisation of home prices would be for the long term rather than immediate,” said Chris Yip, senior director at S&P Global Ratings.
Some owners of several flats are expected to reduce their holdings as the introduction of the property tax re-emerges.
“Once the property tax is introduced, in the short term some homeowners [holding several flats] will offload their assets and even slash their asking prices, and we will see average home prices going down as a result in the cities that will roll out the pilot scheme,” said Xu Xiaole, chief analyst with the Beike Research Institute.