Looming property taxes spark owner panic

BEIJING - Pre-opening queues have snaked around Chinese property trading centers in the past few days, with those in line vexed by the uncertain roll-out date of stricter market regulations.

They have been joined by Chinese netizens in feverish discussion of the March 1 announcement by central government that homeowners who sell will face income tax as high as 20 percent of the profit they make on the transaction. With no firm timeline set for the imposition of the measure, which is designed to cool the red-hot property sector, many are racing to sell.

Consequently, property agencies throughout the country have been inundated by sellers and buyers in a dilemma over the future heavier taxes.

Prior to the new rules, income tax was 1 percent to 2 percent of sale price.

South China's Guangdong province was first to detail its implementation of the measures on Tuesday.

Chen Rugui, deputy mayor of Guangdong capital Guangzhou, said the goal was set to keep increases in home prices below those of its gross domestic product.

Soon, rumor spread that Beijing was to issue detailed regulations on its property market, one of China's most explosive in recent years.

"I have to buy a place to live immediately before my money cannot even cover the taxes," a microblogger with the screen name "laipuxishu" wrote on Sina Weibo, a Chinese Twitter-like microblogging platform.

Famous microblogger "Ren Zhiqiang," president of a real estate company in Beijing, predicted this round of administrative regulation would once again be a failure, just as he and his colleagues have found with previous rounds since 2003.

Meanwhile, Zhu Haibin, chief Chinese economist with JPMorgan Chase & Co., said that efficient tools were needed to curb surging home prices and that measures involving income tax could greatly cut down property deals based on profiteering rather than living demand.

However, Zhu added, the uncertain date of implementation left uncertainty through March, when property deals and home prices may have seen their last crazy rises.

He suggested the central government maintain the measure as a long-term policy and match it with property taxes, which have been piloted in the two municipalities of Shanghai and Chongqing since January 1, 2011.

Property tax remains another hot topic in China, though, with ceaseless debate over whether to expand the range or reset the levy level.

According to data from local statistical bureaus, Shanghai and Chongqing both saw month-on-month increases in home prices in 2012 despite the property tax.

Microblogger "Gouxiongzhuoyu" characterized property tax as little expense for rich people but a disaster for common citizens.

But "hushuobadao" said the property tax efficiently tackled profiteering in the property market.

Hu Jinghui, vice president of 5i5j Real Estate, said the property tax represented a general trend which would likely be adopted in other hot spots like Beijing and Guangzhou.

Many microbloggers worried that property tax would elevate house rents and the higher income tax on house transactions would ultimately be covered by consumers.

JPMorgan's Zhu said the income tax measure will crack down on most future profiteering while the property tax provides the right path to force speculators to sell spare houses.

The property tax will hardly impact common citizens since its levy rules marked out scope for exemptions, Hu added.