Property tax to be expanded

Industry watchers said Saturday that the central government is likely to expand a long-awaited property tax nationwide after the Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee, which will start in November, a further move to control the over-heated property market and to diversify tax resources.

"A long-term and comprehensive macro-control mechanism including property tax and affordable housing construction will possibly be released after the Third Plenary Session of the 18th CPC Central Committee," Nie Meisheng, director of the Chamber of Real Estate of the All-China Federation of Industry and Commerce, was quoted by Securities Daily newspaper as saying Saturday.

Officials from the Ministry of Housing and Urban-Rural Development who wished to remain anonymous were also quoted by the newspaper as saying that property tax will be one of the key areas for government work after the plenary session.

In 2011, China began a property tax pilot program in Shanghai and Chongqing. Such a tax is broadly applied in many Western countries, but China has not taken this step yet. This has prompted many people to buy residences and leave them vacant, while waiting for prices to rise and then sell them again.

Home prices in major cities including Beijing and Shanghai have seen a dramatic rise in the past year. Prices for newly built apartments in 100 major cities nationwide rose by 1.07 percent month-on-month in September, the 16th consecutive monthly rise since June 2012, according to the China Index Academy, a Beijing-based real estate research institute.

Analysts said the rise in prices was partly due to a limited supply of homes, so increasing the supply could help to cool down the market.

"A huge amount of existing apartments will likely be sold if the property tax is imposed," Hu Jinhui, vice president of real estate brokerage 5i5j Property Agency, told the Global Times Sunday.

Hu predicted that following the extension of the property tax, there would be an oversupply of secondhand apartments in major cities for two to three years.

Currently in Shanghai and Chongqing, the property tax is only imposed on apartments that were purchased after 2011. Hu believes this is unreasonable, and said the tax should be extended to all homeowners who own multiple apartments.

In addition to suppressing home prices, Hu also noted that imposing the property tax could diversify revenue resources for local governments.

Local governments depend on land sales as a source of revenue, which means they have an incentive to allow property prices to rise, experts noted.

But Li Zhanjun, a research department director at E-house China R&D Institute, expressed concern that imposing a property tax will lead to a rise in rental prices for ordinary people.

"Unlike in the US, Chinese home buyers can only own a residential property for 70 years, so it would be unreasonable to collect the property tax nationwide," Li told the Global Times Sunday.

To ease the tax burden for ordinary people, Hu of 5i5j Property suggested that the property tax could be offset by trimming other types of taxes, such as capital gains tax.