Property tax draws interest

Shanghai Daily, January 27, 2011

Southwest China's Chongqing Municipality plans to divide houses into 10 categories and levy property tax rates based on the divisions.

"A 3 percent property tax will be enough to put off property speculators," Mayor Huang Qifan said on Tuesday at a working conference of the municipal taxation and financial bureau.

"I recently paid a business visit to Taipei, which levies property taxes between 1 percent and 3 percent," Huang said, adding that the rate is harsher than what Chongqing has in mind.

He said earlier that the taxes would be levied on high-end homes bought before and after the taxes have taken effect. Meanwhile, previous reports predicted the taxes to range from 0.5 percent to 2 percent.

Chongqing and Shanghai will be the first group of cities to implement a property tax on a trial basis. Shanghai is now awaiting the central government's approval to impose the tax which will target only newly-purchased spacious houses though details have not been released yet.

China Business News cited unnamed sources as saying Shanghai will levy the tax on homes of 60 square meters or bigger on a per capita basis. On new homes purchased after the tax is announced, the authorities will add up the total housing space and levy a tax of up to 4 percent on the total value of the newly-bought home.

"It seems local governments do not mean to involve most residences and want to reduce the (tax) influence to the minimum," said He Zhizhong, a Hong Kong-based analyst at BOCOM International Securities Co.

"The tax will not have much impact on curbing housing prices," He added. "Based on international experience, the impact will be gradually digested and not change the long-term trend (of rising prices)."

Still, Shanghai residents are rushing to buy a home ahead of the impending tax. Transactions of existing homes, with a floor area over 140 square meters and costing at least 3 million yuan (US$456,000), rose 36.4 percent in the first half of January from the same period a month earlier. For homes costing over 10 million yuan, there was a 100 percent jump in deals, according to Century 21 China Real Estate.