SHANGHAI • The top decision-making body of the Chinese Parliament on Saturday said it will roll out a pilot real estate tax in some regions, the official Xinhua news agency reported.
The State Council, or Cabinet, will determine which regions will be involved and other details.
The long-mooted and long-resisted property tax has gained new momentum since Chinese President Xi Jinping threw his support behind what experts describe as one of the most profound changes to the country's real estate policies in a generation.
A tax could help cool down red-hot home prices that have soared more than 2,000 per cent since the privatisation of the housing market in the 1990s and created an affordability crisis in recent years.
But talk of the plan is coming at a sensitive time, as the property market shows significant signs of stress and home prices have started falling in several cities.
The tax will apply to residential and non-residential property as well as land and property owners, but does not apply to legally owned rural land or where residences are built on it, Xinhua said.
The pilot schemes will last five years from the issue of the details from the State Council.
The idea of a levy on home owners first surfaced in 2003 but failed to take off due to concerns that it would harm property demand, home prices, household wealth and future real estate projects.
It has faced resistance from stakeholders, including local governments, who fear it will erode property values or trigger a market sell-off. More than 90 per cent of households own at least one home.
But analysts say the tax will bring in much needed revenue.
"Land sales are not a sustainable source of government revenue any more," Capital Economics said in a note last Friday. "Gradual implementation should also mitigate fears that a tax could cause prices to crash."
In pilot programmes rolled out in 2011, the megacities of Shanghai and Chongqing taxed home owners, albeit just those possessing higher-end housing and second homes, at rates from 0.4 per cent to 1.2 per cent.
But until now, the pilot programmes have not been widened to more cities.
Analysts expect a wider pilot to first include wealthier and economically more diversified regions in eastern and southern China, such as the provinces of Zhejiang and Guangdong.
"Zhejiang is likely to be included in the reform, especially Hangzhou," said Mr Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.
Hangzhou, the base of e-commerce giant Alibaba, is China's eighth-richest city, with economic output reaching 1.61 trillion yuan (S$340 billion) last year, about 70 per cent of Hong Kong's gross domestic product.
REUTERS
