Mon, Jan 17, 2011 - Page 11 News List

Shanghai to introduce trial property tax

TWO’S COMPANY:Chongqing Mayor Huang Qifan announced plans to introduce the trial tax for both new and existing homes on Wednesday, but provided no further details

Bloomberg

Shanghai, China’s financial center, will this year prepare for a trial property tax to curb “irrational and speculative” investment, Shanghai Mayor Han Zheng (韓正) said yesterday. He gave no details on how much the tax would be or when it would be implemented.

China is expected to introduce a 0.8 percent tax rate, which will have only a limited impact on the market, according to a report by Nomura Holdings Inc last Monday.

“A property tax will definitely come but it’s not the best way to control prices,” said Fu Qi, an analyst at China Real Estate Information Corp (中國房產信息集團), yesterday. “One of the major challenges in curbing prices is that incomes are on the rise and people have nowhere to invest their money.”

China has pledged to speed up trials for a property tax to rein in surging prices that have made housing too expensive for an increasing proportion of the population. Chinese Premier Wen Jiabao (溫家寶) said on Dec. 26 that -measures to rein in housing costs were not well implemented and that he would introduce more policies to crack down on speculation.

Shanghai will also begin building 220,000 units of subsidized housing as it pushes plans to create affordable homes, Han said in the work report he delivered to the Municipal People’s Congress. The municipality aims to add 1 million units of subsidized housing by 2015, he said.

“We will step up macro-control measures, prioritize the supply of non-luxury residential units to be owned and occupied by ordinary citizens, and prepare for the trial reform of a property tax as required by the central government,” Han said.

Shanghai and Chongqing are expected to be first to roll out property taxes in China, according to Xinhua news agency and Shanghai Securities newspaper in reports last Monday.

Shanghai could introduce a tax on new homes in the first quarter while Chongqing might impose a luxury-property tax at the same time, they reported.

Beijing will act “firmly” to curb rising property prices this year, -including increasing housing supply, Xinhua reported, citing Beijing Mayor Guo Jinlong (郭金龍). The Chinese capital will try to finish 100,000 units of subsidized housing this year, he said.

The city will not participate in the property tax trials the Beijing News reported yesterday, citing Beijing Deputy Mayor Ji Lin (吉林).

Home prices in Shanghai jumped 26.1 percent last year and those in Chongqing surged 29.4 percent, according to Soufun Holdings Ltd (搜房控股), the country’s biggest real estate Web site owner.

The property tax for Shanghai this year will have only a minimal impact because the levy is expected to be low, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc, the world’s second-biggest publicly traded commercial-property broker. He estimates home prices in China will rise 5 percent to 7 percent this year.

Century Weekly magazine reported earlier this month that the tax may be delayed following disputes between government departments.

Chongqing plans to introduce the tax for both new and existing homes, Chongqing Mayor Huang Qifan (黃奇帆) said in an interview with state television CCTV aired last Wednesday, without providing any further details.

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