Shanghai may impose property tax
City's prices seen falling as much as 40%; declines in other cities to follow
(SHANGHAI) Shanghai may impose its own residential property tax to cool price increases in China's richest city, Shanghai Securities News reported yesterday, citing unidentified people close to the government.
The steps may be introduced as early as this month, the newspaper said. The Shanghai Municipal Housing Support and Building Administration Bureau didn't respond to questions from Bloomberg when contacted by telephone.
Property prices in Shanghai may fall as much as 40 per cent if the new tax is imposed, and declines in other cities would follow, according to Wu Jianxiong, a Shanghai-based analyst at Central China Securities Holdings.
Shanghai would be the first city in China to impose its own property tax to combat speculation in the housing market and control price increases that have sparked inflation concerns in Beijing.
Real estate prices rose by a record 12.8 per cent in April from a year earlier, the National Bureau of Statistics said on Tuesday. That increase was the 'last glimmer of the setting sun' before government actions to curb prices take effect, Mr Wu said.
China has restricted pre-sales by developers, curbed loans for second and third-home purchases and, on Monday, raised the minimum reserve requirements at banks for the third time this year.
'It's very likely that we will see many real estate developers offer more discounts for newly built apartments in Shanghai in the near term,' said Lu Qilin, a Shanghai-based researcher at U-Win Real Estate Research Center.
Chinese banks can withstand a 30 per cent to 40 per cent decline in home prices, the 21st Century Business Herald reported on Monday on its website, citing unidentified bank officials. The nation's banks have finished stress tests on mortgage exposure, the Guangzhou-based newspaper said.
The idea of a city-wide property tax is 'entirely normal', the Shanghai municipal housing bureau said in an April 8 statement. Local governments can implement the tax with central government approval, it said.
China's surging property market is in its 'last madness' and speculators may retreat on caution by local authorities, Central bank adviser Li Daokui said on April 17.
The government is trying to reduce the effects of a stimulus plan and a US$1.4 trillion lending binge that revived economic growth and increased the risk of an asset bubble.
'China has plenty of demand right now, so this is no bubble in my definition,' Hang Lung Properties Ltd chairman Ronnie Chan said in a Bloomberg Television interview on Monday broadcast yesterday.
'A bubble to me, if you want to be more precise, is the huge rise in market prices in the absence of demand.
'I think the buying opportunities are ahead of us, not behind us,' he said\. \-- Bloomberg
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Crowd puller: Real estate prices rose by a record 12.8 per cent in April from a year earlier, the National Bureau of Statistics said on Tuesday
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