China speeds up introduction of property tax
As part of the plan to contain housing price, China vows to step up housing system reform and create a long-term market mechanism.
When and how a property tax will be levied has long been a public concern.
China’s finance minister Xiao Jie has published his policy statement on People’s Daily, the Communist Party of China (CPC)’s flagship newspaper.
What have been specified?
Xiao outlined that property tax will be levied on industrial and commercial properties, as well as personal residential houses, based on their “appraised value”. He also suggested the legislation work would be completed by 2019, which would lay the foundation for its enforcement in as early as 2020.
Experts believe it has sent out signals for the speeding up of China’s introduction of property tax.
“The article shows that the authorities now have clearer thinking on the levy of property tax, as substantial questions have been specified, especially how the taxes will be collected,” said Yan Yuejin, senior researcher of the Shanghai-based E-house China R&D Institute.
Yan noted that “appraised value” means a comprehensive assessment of the original and current value of the property, while also taking into account affecting factors such as the real estate market situations and the price of similar property in surrounding areas. “It’s a rather fair and reasonable way to do it,” Yan added.
It would require the establishment of an appraising system by each city, according to Zhang Dawei, chief analyst of Beijing-based Centaline Property, a leading property agent company. In Xiao’s article, he also confirmed that local governments would obtain enough authorization in the process.
“That means local governments are allowed to run pilot policies based on their specific circumstances, so as to map out practical schemes that suit local development,” said Jiang Zhen, research fellow with Chinese Academy of Social Science, “and their experiences drawn from the pilot programs will become important reference for property tax legislation, which will be pressed ahead steadily.”
Why is property tax put on China’s legislation agenda?
“Housing is for people to live in, not for speculation,” this has been the tone-setting slogan for China’s real estate market since it was first brought up by Chinese president Xi Jinping on the Central Economic Work Conference in December 2016. The long-awaited property tax is a key measure to reduce the appeal of houses as speculative investment, and bring the development of China’s housing market to the right direction.
China’s property price has been rocketing for over a decade, partly due to Chinese investors’ preference for houses as investment and the resulting speculations. Bloomberg estimated that 25 percent of China’s housing demand is out of speculations.
At present, taxes are only levied when houses are bought or sold, which leaves multi home owners with no extra financial burdens. The planned introduction of property tax may not only deter future speculators, but also drive existing multi home owners to sell extra ones before the enforcement of the new tax, thus increasing housing supply in the market.
But it’s all up to the release of further details on how the property tax will be rolled out step by step.