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Sunday 13 March 2011
China’s first property taxes kick in
China on Friday launched a long-awaited property tax in two of the country’s biggest cities, but the mayor of Chongqing in the southwest warned the measure was not a cure-all for soaring prices.
China on Friday launched a long-awaited property tax in two of the country’s biggest cities, but the mayor of Chongqing in the southwest warned the measure was not a cure-all for soaring prices.
People buying higher-end second homes in Shanghai, China’s wealthiest city, and Chongqing, home to 30 million people and the country’s fastest-growing municipality, now have to pay a 0.4-1.2 percent annual tax, officials said.
Earlier this week, the government hiked the minimum down payment for second homes to 60 percent from 50 percent and ordered authorities to rein in property prices as it moved to quell growing public angst about high real estate costs.
But Chongqing Mayor Huang Qifan said the pilot tax programmes were not aimed at clipping the soaring housing prices that are a top consumer concern across the country.
“People will ask if I think the real estate tax will definitely bring property prices down.... No one believes the property tax will hit the nail on the head and bring prices down,” Huang told a news conference late Thursday.
He estimated the levy would generate 150 million yuan ($22.8 million) in revenue for the municipal government this year, according to an official transcript, although state media cited him as saying 200 million yuan.
The taxes will have limited impact on curbing property prices, but they will affect the speculators who helped push up housing costs, said Chen Sheng, deputy director at China Index Academy, a property research firm.
“It is a historic breakthrough because it is the first time in China that people need to pay for holding real estate assets,” Chen said.
Michael Klibaner, head of China research for property company Jones Lang LaSalle, said the ultimate aim of the tax was to establish a way for the government to generate long-term tax revenue from property holdings.
“Previously there was very little holding cost for residential property because many people paid 100 percent cash for these properties. Now the holding cost is no longer zero,” Klibaner told AFP.
“When the holding cost is zero, it’s very easy to let these homes sit idle. It doesn’t cost you anything to let them sit there. It’s like gold,” he said.
The two cities announced different tax pilot projects almost immediately after the State Council, China’s cabinet, said it had approved the trials on Thursday.
Shanghai announced a flat 0.6 percent tax on new second homes that are double the average market price. New second homes costing less will be subject to a 0.4 percent tax.
Chongqing introduced a progressive tax ranging from 0.5 percent for homes that are double the market average price and rising to a maximum of 1.2 percent depending on the value of the home.
The finance ministry said that if conditions were right, the property tax would be expanded to the rest of the country.
Klibaner said the central government would study the two versions and roll out the most effective one nationwide.
The pilot taxes are an initial step in long-term market reforms that will eventually include value assessment procedures and building a unified land and property registry, he said.
Property prices in China’s major cities posted their fourth straight month-on-month rise in December and sales picked up pace, according to the latest government figures.
Prices in 70 major cities were up 0.3 percent last month from November and 6.4 percent higher than a year ago.
The annualised surge peaked in April, when prices soared 12.8 percent, but growth has since slowed.
Prices have remained stubbornly high, despite a range of government measures such as hiking minimum down-payments on property transactions to at least 30 percent in a bid to avoid a damaging price bubble.
In Shanghai, the stock market reaction was mixed with some developers’ shares rising because the tax rates were lower than many expected, dealers said. The Shanghai index closed 0.13 percent higher on Friday.
Most cash buyers are rich people. But most people who are always in cash buying are those real estate investors that practices the business of Buy and Sell.
2 comments:
China’s first property taxes kick in
AFP
28 January 2011
China on Friday launched a long-awaited property tax in two of the country’s biggest cities, but the mayor of Chongqing in the southwest warned the measure was not a cure-all for soaring prices.
People buying higher-end second homes in Shanghai, China’s wealthiest city, and Chongqing, home to 30 million people and the country’s fastest-growing municipality, now have to pay a 0.4-1.2 percent annual tax, officials said.
Earlier this week, the government hiked the minimum down payment for second homes to 60 percent from 50 percent and ordered authorities to rein in property prices as it moved to quell growing public angst about high real estate costs.
But Chongqing Mayor Huang Qifan said the pilot tax programmes were not aimed at clipping the soaring housing prices that are a top consumer concern across the country.
“People will ask if I think the real estate tax will definitely bring property prices down.... No one believes the property tax will hit the nail on the head and bring prices down,” Huang told a news conference late Thursday.
He estimated the levy would generate 150 million yuan ($22.8 million) in revenue for the municipal government this year, according to an official transcript, although state media cited him as saying 200 million yuan.
The taxes will have limited impact on curbing property prices, but they will affect the speculators who helped push up housing costs, said Chen Sheng, deputy director at China Index Academy, a property research firm.
“It is a historic breakthrough because it is the first time in China that people need to pay for holding real estate assets,” Chen said.
Michael Klibaner, head of China research for property company Jones Lang LaSalle, said the ultimate aim of the tax was to establish a way for the government to generate long-term tax revenue from property holdings.
“Previously there was very little holding cost for residential property because many people paid 100 percent cash for these properties. Now the holding cost is no longer zero,” Klibaner told AFP.
“When the holding cost is zero, it’s very easy to let these homes sit idle. It doesn’t cost you anything to let them sit there. It’s like gold,” he said.
The two cities announced different tax pilot projects almost immediately after the State Council, China’s cabinet, said it had approved the trials on Thursday.
Shanghai announced a flat 0.6 percent tax on new second homes that are double the average market price. New second homes costing less will be subject to a 0.4 percent tax.
Chongqing introduced a progressive tax ranging from 0.5 percent for homes that are double the market average price and rising to a maximum of 1.2 percent depending on the value of the home.
The finance ministry said that if conditions were right, the property tax would be expanded to the rest of the country.
Klibaner said the central government would study the two versions and roll out the most effective one nationwide.
The pilot taxes are an initial step in long-term market reforms that will eventually include value assessment procedures and building a unified land and property registry, he said.
Property prices in China’s major cities posted their fourth straight month-on-month rise in December and sales picked up pace, according to the latest government figures.
Prices in 70 major cities were up 0.3 percent last month from November and 6.4 percent higher than a year ago.
The annualised surge peaked in April, when prices soared 12.8 percent, but growth has since slowed.
Prices have remained stubbornly high, despite a range of government measures such as hiking minimum down-payments on property transactions to at least 30 percent in a bid to avoid a damaging price bubble.
In Shanghai, the stock market reaction was mixed with some developers’ shares rising because the tax rates were lower than many expected, dealers said. The Shanghai index closed 0.13 percent higher on Friday.
Most cash buyers are rich people. But most people who are always in cash buying are those real estate investors that practices the business of Buy and Sell.
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