January 10, 2011 / 2:39 AM / 9 years ago

China may launch first-ever property tax in Q1

SHANGHAI/BEIJING (Reuters) - China is set to further clamp down on the country’s buoyant housing market by imposing a long-debated property tax for the first time in the southwestern city of Chongqing, domestic media reported on Monday.

Chongqing has “in principle” won approval from the Ministry of Finance and may introduce the property tax as early as this quarter, the China Securities Journal cited the city’s government as saying.

Analysts expect the tax to be about 1 percent, the Journal said.

China has debated for many years about having a property tax but held back out of fears it may seriously harm the market.

Domestic media reports in recent months suggest, however, that China’s government is finally warming to the idea and may impose a property tax on a trial basis in several cities including Chongqing, Shanghai, Beijing and Shenzhen.

The China Business News said on Monday that Chongqing is likely to only tax high-end properties, in contrast to Shanghai, which reportedly will only tax selected second homes.

China has taken a slew of measures to cool its red-hot property market since late 2009 as part of efforts to fight speculative “hot money” flowing into the country.

Despite the measures, house prices in China’s major cities soared by more than a fifth last year.

Analysts welcomed the tax as a way to restrain the market.

“Conditions are now right to start levying a property tax and China should launch it as soon as possible,” the China Securities Journal quoted the State Information Center, a government think tank, as saying.

The center forecast China’s home prices may ease this year, and predicted the government will jack up down payment requirements and mortgage rates if property prices rebound.

The official People’s Daily, a mouthpiece of the Communist Party, said likewise.

“Overall, property policies in 2011 will remain tight,” the paper said. “If economic conditions improve, property policies could even tighten.”

Underlining the property market’s buoyancy, the State Information Center predicted property investment will grow over 20 percent this year, driven by robust demand and big profit margins in the industry.

Property investment jumped nearly 37 percent in the first 11 months of 2010 from a year ago.

Reporting by Lu Jianxin, Langi Chiang and Kazunori Takada; Editing by Koh Gui Qing and Ken Wills

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