China may expand property tax in '12
Updated: 2011-12-08 17:00
BEIJING - Property tax has dominated the news recently, after a senior researcher said the country may consider expanding its property tax trials next year.
Jia Kang, director of the Fiscal Science Research Center of the Ministry of Finance, said Wednesday that the government will sum up lessons learned from the trials in Shanghai and Chongqing at the end of the year and map out an expansion plan, but added that conditions were not yet ripe for applying property taxes to the entire country.
Jia's view was shared by Li Youhua, a property expert and professor with Jimei University. "The government will likely extend the property tax to more first- and second-tier cities next year," he said, predicting that restrictions on home purchases will be phased out when the property tax applies to most parts of the country.
China introduced the property tax trials in Shanghai and Chongqing at the beginning of the year as part of its efforts to curb skyrocketing home prices and contain asset bubbles.
Analysts said the country may accelerate the introduction of property tax nationwide in order to help capital-starved local governments increase revenues and pay off debts.
Due to the government's tightening measures, land sales in 130 major cities fell 30 percent year-on-year to reach 1.18 trillion yuan ($185 billion) during the first 11 months of the year, according to a report issued by Centaline Property Consultants Ltd..
Yang Zhenghu, director of the Guangdong Contemporary Economic Research Center, said some local governments will see their land sales down more than 50 percent this year.
As local governments with stretched finances rely on land sales for their revenues, a tumble in this area could spell disaster.
"This year and next will be the peak time for local governments to pay off their debts. But how will they repay them with a sharp drop in land sales?" Yang asked.
Total debts reached 10.72 trillion yuan at the country's provincial-, city- and county-level governments by the end of 2010, according to the National Audit Office.
"As local governments are stuck between cooling sizzling property markets and obtaining adequate revenues, the expansion of the property tax trials may be the right solution for them to strike a balance," Jia Kang said.
Property taxes will become one of the main sources of revenue for local governments, and will gradually replace administrative measures such as those limiting home purchases in regulating the property sector, Jia added.
Meanwhile, some analysts said they don't expect an overall loosening of property-market-tightening measures next year, as any easing may lead to a rebound in home prices and lay waste to the government's two-year tightening efforts.
The People's Bank of China, China's central bank, said earlier this month that home prices are about to reach a "turning point," after Vice Premier Li Keqiang reiterated that China will maintain restrictions on the property market to "consolidate the results of the controls."
Real estate sales and prices have been falling nationwide due to tough restrictions on purchases and bank lending.
Property prices fell for a third month in November, dropping 0.28 percent month-on-month after a fall of 0.23 percent in October, said a report from China Index Academy, a leading institute for real estate research.
New home prices in Beijing fell 10.1 percent year-on-year to reach 19,165 yuan per square meter in November, a 16-month low, according to the report from Centaline Property.