Workers labor on a construction site for a residential development in Shanghai. Photo: CFP
By Zhao Qian
Sitting on a stone bench with his wife, Li Desheng, a 75-year-old man said he was excited about the rumors that China would impose a property tax soon.
"It will discourage speculators from buying apartments, storing them and then selling them rather than living in them. And rumors say that people who have more than two units need to pay more holding tax. That’s reasonable," Li said on May 22.
Li, a retired thermal power company employee, lives in a 70-square-meter apartment in Beijing’s Chaoyang district with his wife, son, daughter-in-law and granddaughter. There used to be more, however.
"But our daughter with her husband’s family, three members in all, moved out of our small apartment, and rented an apartment nearby bit," his wife said with a sad expression.
We can’t afford another one because the housing prices are much too high," she said.
"Maybe imposing a property tax will help suppressing the soaring home prices?" Li asked.
China does not impose a property tax like many Western countries New, including the US dress, do and consequently many have rushed to buy residences and hold them vacant to maintain their value full, while waiting for prices to rise and then selling them again.
In order to cool the overheated property market, the central government has released a series of credit-tightening policies during the past year, including one in mid-April saying that "purchasers looking to buy second houses will have to make down payments of no less than 50 percent of the total value of the properties."
The sales volume quickly shrank as people took a "wait-and-see" attitude hoping that prices would drop. So far, that hasn’t happened.
"Imposing a property tax will be the central government’s ‘last card to play’ to suppress the home price," Li Zhanjun, a department director of the E-house China R&D Institute, told the Global Times.
Rampant rumors
On May 12, the Shanghai Securities News quoting unnamed sources close to the municipal government reported that the city would impose a property tax on owners of multiple houses.
But more rumors related to the tax jangled people’s nerves later.
Li was confused as another rumor came out later the same afternoon (May 22) when the interview was nearly completed.
The China Times quoting Huang Hanquan, assistant director of the industrial institute under the National Development and Reform Commission (NDRC) said that a property tax is not expected within the next three years – news of which caused the property share price to rebound the next trading day.
But two days later, the NDRC denied the rumors saying the researcher was from a subsidiary research institution cheerleaders, whose opinion did not represent the NDRC, and "the news seriously impacted the market."
"In China, local governments depend a lot on land sales as a kind of revenue source, that means they have the incentive to boost the property price as high as possible as a kind of revenue, it is just a one-time or short term thing," said Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management
"Nobody likes to pay taxes. But actually the fact is people are already paying taxes in the form of ‘hidden tax’, that is the high price of government land sales. And if the property tax replaces that as a source of revenue, it will be more sustainable," Chovanec said.