China Real Estate: Chongqing Property Tax to include used homes12 January, 2011, 20:48. Posted by Zarathustra
Tags: Chongqing, Property Tax, Real Estate
Following up on my previous report that China is planning to collect property tax in Chongqing and Shanghai, new details emerged from the media on the Chongqing’s plan to tax luxury residential properties buyers.
Mayor Huang Qifan is reported to have said on CCTV, the state TV station, that all homes (new and existing) will be taxable, and the tax rate will be 1% for those homes priced at 3 times of the average home. The report also suggests that the consensus among analysts was that it will only include new homes, and the tax rate was expected to be 0.8% instead of 1%. Besides that, I have seen no further details on actual implementations.
New details has also emerged on Shanghai Property Tax. According to Hong Kong Economic Journal, the property tax will be levied on families with 200 square meters or more properties, for every extra square meter above 200, the rate will be at 0.8% of the home prices or lower per year. For instance, if a family owns 180 square meter of properties, and then buys another 100 square meter of properties, the taxable area will be 80 square meter.
Although everyone seems to be dreading on the property tax, one thing is quite clear to me. Hong Kong is imposing a 15% extra stamp duty for reselling property within 6 months, 10% within 12 months, and 5% within 24 months. However, prices did not drop, and we can very well forget about this extra stamp duty. Similar approach of the Chinese government of using administrative measures simply does not hit the core of the problem, just like the Hong Kong government failed.
In order to stop home prices from climbing higher, the Chinese government need to raise interest rates and allow Chinese Yuan to appreciate. This will likely produce a recession, and the government is certainly very determined to avoid a hard landing. Piecemeal approach simply will not work, and the Chinese government is way behind the curve.
I will be bringing to you latest updates when more details emerged. Stay tuned!