Chongqing, Shanghai unveil property tax as China curbs bubble

The Chinese cities of Chongqing and Shanghai yesterday announced the launch of a long-awaited property tax, a day after additional nationwide tightening measures unveiled late on Wednesday by the State Council, China’s Cabinet.

Chongqing is the world’s biggest city with a population of some 32 million. Its mayor, Mr Huang Qifan, announced the pilot scheme yesterday, Chinese news portal reported. The trials will start today, with taxes ranging from 0.5 per cent to 1.2 per cent on “high-end” property, based on the transaction value.

Shanghai will, beginning today, levy a 0.6-per-cent real estate tax on new homes bought by non-residents and second homes bought by local residents, reported.

The moves come as state media reported that the State Council had approved property tax collection trials in various cities to help curb surging prices and prevent property bubbles. Each city will decide the details of its property tax programme to suit its own requirements, it said, without naming the cities.

On Wednesday, the State Council ordered banks across the country to raise downpayments to 60 per cent for people buying their second homes, up from 50 per cent previously. City governments must also set property price control targets in line with local income levels for this year and make them public this quarter, the Cabinet said.

Land for affordable housing, reconstruction of shantytowns, and medium and small commercial houses should be no less than 70 per cent of the regional government’s total supply. Regional governments should “strictly” formulate property purchase policies and local residents with two homes will be banned from further purchases, the Cabinet statement said.

The government also set interest rates for second-home mortgages at no less than 110 per cent of benchmark rates, and said people selling homes within five years of purchase will be charged full transaction taxes, according to the State Council statement, which cited a meeting chaired by Premier Wen Jiabao.

“China will continue to effectively curb investment and speculative purchases of houses to consolidate and expand on previous measures,” according to the statement.

The government last year raised downpayments for second homes, suspended mortgages for third home purchases and restricted loans to developers. Some cities, including Beijing, limited the number of homes local residents can buy. In October, the central bank increased interest rates for the first time in three years and raised borrowing costs again on Dec 25.

Premier Wen said last Tuesday that the government will “resolutely” implement controls on the real-estate market in the first quarter, including curbing speculation and increasing supplies of affordable housing.

Deutsche Bank said the measures reflected the strong determination of the government to stabilise property prices in China, adding “we expect to see continued credit tightening and further interest rate and reserve-ratio requirement hikes”.

An index of Chinese property stocks in Shanghai fell 1.2 per cent at the close of trading yesterday, even as the main Shanghai Composite Index rose 1.5 per cent on the back of the resource sector. The real estate gauge was the worst performer among five industry groups last year, declining 28 per cent.

China Vanke, the nation’s biggest developer by market value, lost 2.5 per cent in Shenzhen trading. Gemdale Corp declined 3.5 per cent and Poly Real Estate Group tumbled 4.3 per cent.

Source : Today – 28 Jan 2011

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