From Chinese Press

Property tax

(China Daily)
Updated: 2010-10-12 07:58

The government plans to impose a property tax on people who buy more than one house. The idea is to curb realty speculation by increasing the cost of buying property. Since urbanization is intensifying in the country, the move may not be able to lower the sky-rocketing housing prices, but it can help foster rational demand, says an article in People's Daily. Excerpts:

To begin with, local governments may be authorized to make their own rules for the collection of property tax, which would be based on local housing markets. Plus, a property tax will boost their coffers.

Since a property tax is targeted at those buying a second house, it could be used to improve the livelihood of the low-income groups and the homeless. This would help redistribute wealth more meaningfully.

More importantly, tax constraints would help curb realty speculation.

A property tax will certainly add to the financial burden "house hoarders", forcing many of them to rent out their houses to offset the extra cost. In this case, a property tax could help reduce the vacancy rate in newly bought house.

The huge profits that speculators make may easily offset the extra cost of paying for a second or third house.

But because of the constraints created by the introduction of a property tax, they have to be more cautious than before about investment in the real estate. A property tax contributes to a stable supply of residential units, boosting the long-term development of the real estate industry.