SHANGHAI Feb 1 China will postpone the
expansion of a pilot programme to implement a property tax, the
official China Securities Journal reported, citing anonymous
official sources, who added that Beijing intends to keep a tight
lid on the property market through other means.
The officials were quoted as saying the market was not yet
mature enough for wider implementation of the tax, citing the
general complexity of the residential housing market, the lack
of clarity regarding property rights and technical issues as
reasons for the delay.
The report marks a step away from a statement by an official
from the State Administration of Taxation last September that
suggested the programme was about to be expanded beyond its
original sites of Shanghai and Chongqing in order to cool rising
The Chinese property share index showed little
immediate reaction to the news, opening up 0.4 percent then
declining along with the wider market after official data showed
China's manufacturing activity moderated in January.
China's plan for a nationwide property tax is designed to
unify its present array of property-related taxes and replace a
slew of restrictions on multiple and speculative home purchases,
in response to a 10-fold surge in property prices over the past
Administrative measures restricting mortgages and otherwise
targeting speculative behaviour caused housing prices to decline
for part of 2012, as Beijing attempted to rein in destabilising
consumer price inflation, but the property market has shown
signs of reheating in recent months.
The risk that inflationary pressure might increase in 2013
has caused some economists to predict that Beijing will need to
tighten monetary policy later in the year, after loosening it in
The decision to hold off on expanding the pilot would mark a
setback in efforts to wean local governments from what many
economists see as an unsustainable dependence on land sales for
Because property is not directly taxed after sale, experts
say local governments continuously seek to sell new property to
meet budgetary commitments and to invest in infrastructure
projects that generate positive GDP figures, which are
considered key to secure promotions.
This has led to a widespread and unpopular practice of
forcing residents to relocate from existing developments so the
property can be resold to property developers.
At the same time, the low cost of buying and holding
property makes it easier for developers to hold that property
off the market in hope of further appreciation, and also means
there is less economic incentive to rent out empty units.
The result has been an explosion in rents that has cut into
the incomes of lower- and middle-class Chinese citizens unable
to afford to buy a home.
The government should continue to explore other tools,
including other forms of taxation, to regulate the market,
Friday's report said.
(Reporting by Pete Sweeney; Editing by Edmund Klamann)