China’s property tax trial likely delayed amid real estate crisis

(Bloomberg) — China’s property tax could be another casualty of the housing market slump, with analysts expecting the government to suspend testing expansion of the tax due to a related economic slowdown. to real estate.

In October last year, China’s parliament authorized the extension of limited property tax in Shanghai and Chongqing to other cities, with some analysts predicting it could begin by the end of 2021. However, the The rapidly deteriorating real estate sector and the lack of any detailed implementation plan from the State Council is fueling speculation that the government is waiting for a market recovery before starting the tax.

“Now may not be the time to start the trials, as the economy and the real estate market are both under pressure,” said Liu Jianwen, a professor at Peking University, who is also legal adviser to the Ministry of Finance and Legislative Advisor to the Standing Committee of the National People’s Congress.

Although the country’s top leaders are “very cautious” about it now, the trial will not be suspended for a long time as officials are “very determined” to open it, Liu said last week.

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China has been talking about implementing a nationwide property tax to regulate the market and control soaring prices for more than a decade, since before the start of the trial in Shanghai and Chongqing in 2011. Nothing happened. produced so far, likely due to opposition from owners and developers who fear the tax will drive prices down.

Authorities reverted to the property tax idea last year as part of a broad effort led by President Xi Jinping to promote “common prosperity”. According to an October statement from the national parliament, the tax is designed to guide rational property buying and will target all kinds of residential and non-residential properties in the test areas, except rural housing.

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However, the rapid downturn in the industry after the government crackdown on subprime lending and other factors such as the announcement of the tax plan made it more difficult for the tax to actually start. Analysts said the government’s fine-tuning of some housing restrictions and support for mortgage lending were not enough to stop the slide.

“This is only a marginal policy easing and the regulatory tone of stabilizing home prices, land prices and market expectations is clear,” Kristy Hung and Lisa Zhou said last week. , Bloomberg Intelligence analysts. “Now might be a better time to start property tax trials when the market is calm.”

According to Hung and Zhou, one of the signs of a recovery in sentiment would be the end of the decline in sales that began in July. Some analysts expect that to happen this year.

“The property market should see signs of recovery in the first half of this year,” said Xu Xiaole, chief market analyst at Beike Research Institute. “Transaction volumes will likely bottom out in the first quarter and house prices may stop falling in the second quarter.”

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Penny D. Jackson