Property taxes likely coming to more cities

One year after property tax was enforced, its effect in pulling down housing sales volume and prices has proven to be limited, despite earlier high expectations, analysts said Saturday.

"Last year, housing prices in Beijing and Guangzhou, where no property tax was levied, dropped almost at the same rate as Shanghai, which displayed a limited effect from the tax," Liu Yuan, a senior manager at Shanghai-based Centaline China Property Research, told the Global Times.

Shanghai and Chongqing municipal governments began levying property taxes last year. In Shanghai, natives who purchased a second home and who owned more than 60 square meters housing space have had to pay property tax since

January 28 of 2011. In Chongqing, property tax was levied mainly on owners of villas and high-end apartments.

Some pinned high hopes on the tax to cool down the overheated real estate market, but its effect was limited as it only targeted a small group of buyers and its low rate was more nominal than substantial.

Every Shanghai permanent resident, for instance, can be exempted tax for a 60 square meter dwelling, which means one only needs to pay tax for 20 square meters of an 80 square meter house. "And in cases of some high-end apartments or villas, the amount of annual property tax is lower than its annual property management fees," Liu said.

To cool the overheated housing market, China has ushered in measures over the past two years including higher down payments, higher lending rates for second-home buyers and hikes in the benchmark lending rates.

Unlike restrictions that help prevent one to enter the housing market, "tax policy enhanced purchase costs, which can be passed on to tenants," said Liu Weiwei, an analyst with the Shanghai-based E-house China R&D Institute.

The Ministry of Housing and Urban-Rural Development, China's housing authority, said earlier this month that it is working on the construction of a personal housing information system and sharing information for 40 major cities online by the end of June, a move many predict to facilitate the levy of a nationwide property tax.

"More cities will follow Shanghai and Chongqing this year for sure," Gu Yunchang, secretary-general of the China Real Estate Association, told the Global Times. "But one cannot expect too much from the tax policy in reducing housing prices as the tax, though having played some role in curbing housing speculation, is mainly meant to increase local government revenue."