China’s State Council will expand property-tax reform trials to more areas and begin taxing residential property owners, official Xinhua news agency reported.
According to the report, the plan approved by China’s top legislative body, the National People’s Congress Standing Committee, is designed to guide rational asset purchases and will last for five years. The number of locations and areas to be tested was not specified.
Property prices in China have reached unprecedented levels since the introduction of private home ownership in 1998, and the government has faced an ongoing battle to control speculators. Authorities began property tax trials in Shanghai and Chongqing in 2011, imposing an annual fee on second- or higher-priced homes.
Housing owned by individuals is not currently subject to taxes, as per a law enacted in 1986, while there is an annual tax on commercial properties. Local governments mainly generate income from developers through land sales, collecting a total of 8.4 trillion yuan ($1.3 trillion) last year.
Industry experts say the details of the scheme are not yet clear.
“We don’t know yet what the difference between this plan will be compared to the current trials in Shanghai and Chongqing, but it has the potential to be something new,” said Liu Yuan, vice president of asset research at Centline Group. “The government does not want to immediately make all the details public for expectation management. But I think it is aimed at hedging the ongoing asset-market supportive measures so that home prices do not rebound.”
China’s new home prices fell for the first time in six years and sales in September fell 16.9% from a year earlier, as the country’s second-largest real estate developer, the Evergrande Group, plunged into a debt crisis that caused property There was a recession nationwide.
The country has recently eased restrictions on home loans at some of its largest banks, Bloomberg reported on October 15.
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