China Should Advance Property Tax Law – Think Tank

A man walks through a residential area in downtown Shanghai, January 28, 2011. REUTERS / Carlos Barria

BEIJING, Nov. 10 (Reuters) – China should push forward legislation on a property tax bill and keep the line on speculative buying, a state think tank said, underscoring Beijing’s determination to tame the real estate market once unruly despite the upheavals underway in the sector.

Last month, the top decision-making body of the Chinese parliament announced it would implement a pilot property tax in some areas. Read more

A property tax could deter speculators and curb the soaring house prices that have created an affordability crisis in recent years. More generally, such a tax on homeowners is viewed by analysts and investors as one of the most profound changes in China’s real estate policies.

China must do a good job with the pilot projects, wrote Ma Jiantang, Communist Party chief executive at the Development Research Center (DRC) of the State Council on Wednesday.

A tax would increase the cost of owning property, potentially slowing the pace of purchases and dragging down cash flow for developers.

Many indebted Chinese developers, including China Evergrande Group, have been in dire financial straits since Beijing tightened rules on new borrowing last year as real estate sales cooled, prompting them to look for other sources of capital as debt payment dates loomed. Read more

“Houses are made to live in, not to speculate,” Ma wrote in an article in the People’s Daily, the official Party newspaper, recalling similar exhortations from senior officials in recent years.

The DRC, although not a decision-making body, submits policy proposals on China’s national development and its economy to the State Council, or cabinet.

Reporting by Ryan Woo; Editing by Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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