Shanghai to test property tax - mayor

Shanghai, China's financial centre, will this year prepare for a trial property tax, says Mayor Han Zheng.

Han yesterday gave no details on how much the tax would be or when it would be implemented.

China is expected to introduce a 0.8 per cent tax rate, which a report by Nomura Holdings last week said would have a limited effect on the market.

China has pledged to speed up trials for a property tax to curb surging prices that have made housing too expensive for an increasing proportion of the population.

Premier Wen Jiabao said on December 26 that measures to rein in housing costs were not well implemented and that he would introduce more policies to crack down on speculation.

"We will step up macro-control measures, prioritise the supply of non-luxury residential units to be owned and occupied by ordinary citizens and prepare for the trial reform on property tax as required by the central Government," Han said in the work report to the Municipal People's Congress.

Shanghai would also begin building 220,000 units of subsidised housing as it pushed forward with plans to create affordable homes, Han said.

The cities of Shanghai and Chongqing are expected to be first to roll out property taxes in China, according to the official Xinhua News Agency and Shanghai Securities Newspaper in reports last week.

They said Shanghai might introduce a tax on new homes in the first quarter while the southwestern city of Chongqing might impose a luxury-property tax at the same time.

Home prices in Shanghai jumped 26.1 per cent last year and those in Chongqing surged 29.4 per cent, said Soufun Holdings, the country's biggest real-estate website owner.

Michael Klibaner, head of China research at Jones Lang LaSalle, the world's second-biggest publicly traded commercial-property broker, said the property tax for Shanghai this year would have a minimal impact because the levy was expected to be low,

He reckoned China's home prices would rise 5 to 7 per cent this year.

The Century Weekly magazine reported this month that the tax might be delayed after disputes between government departments.

Chongqing Mayor Huang Qifan told state television CCTV only that his city planned to introduce the tax for new and existing homes. Beijing News, quoting Deputy Mayor Ji Lin, said yesterday that the capital city would not join the trials.

- BLOOMBERG