China Mulls Property Tax To Cool Real Estate Market

by Mary Swire, Tax-News.com, Hong Kong

25 January 2010

The Chinese government is considering whether to roll out a nationwide tax on property in a bid to cool the real estate market and avert a property bubble, after easier credit conditions and tax concessions boosted demand and fueled rising prices last year.

Figures released by China's National Bureau of Statistics on January 19 showed that property sales rose by 75% in 2009 compared with the previous year, as the total of new property loans granted by lenders doubled to just under CNY10 trillion (USD1.46 trillion) during the year. In December, house prices rose by 7.8% compared to the same month in 2008, the largest year-on-year growth in prices for 18 months.

Price rises have been particularly rapid in the major cities, such as Beijing, Shanghai and Shenzhen, and, according to Reuters, the central government is already trialing a new property tax in 32 cities, counties and districts. However, analysts doubt whether a new general property tax, which could replace current taxes and fees paid when a property is sold, will be put in place this year, as time is needed to draft what could turn out to be complex legislative proposals.

In a bid to cool speculation, last month the government increased the minimum time period for property owners to qualify for exemption from the property turnover tax to five years from two, reversing a change put in place at the end of 2008 after a year in which the market faltered amid tighter lending conditions.

The government has also imposed a fee on land transfers and issued new rules increasing the required down payment needed to purchase land.

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