SHANGHAI (Reuters) – The top decision-making body of the Chinese parliament said on Saturday it will roll out a pilot real estate tax in some regions, the official Xinhua news agency reported.
The State Council will determine which regions will host the pilot tax and other details, Xinhua added.
China’s long-mooted – and long-resisted – property tax has gained new momentum as President Xi Jinping threw his support behind what experts say would be one of the most profound changes to the country’s real estate policies in a generation.
A tax may finally tame the country’s red-hot home prices, which have soared more than more than 2,000% since the privatisation of the housing market since the 1990s in a fast-urbanising China, and in recent years creating an affordability crisis especially among millennials.
But talk of the plan is coming at a sensitive time, as the property market is showing significant signs of stress and home prices have started falling in some areas.
The real estate tax will apply to residential and non-residential property as well as land and property owners, but does not apply to legally owned rural homes and residences which are appended, Xinhua said.
The pilot schemes will have a duration of 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 has failed to take off due to concerns that it would damage property demand and tank home prices, hurting household wealth and future real estate projects. It has also faced resistance from stakeholders including local governments, who fear it would erode property values or trigger a market sell-off.
In pilot programmes rolled out in 2011, the megacities of Shanghai and Chongqing have taxed homeowners, albeit just those possessing higher-end housing and second homes, at rates from 0.4% to 1.2%.
But until now the pilots have not been widened to more cities.
Mainland China’s Reliance on Land Sales (by province) https://tmsnrt.rs/3lyvluJ
(Reporting by Steven Bian and Engen Tham in Shanghai; Editing by Kim Coghill)