Real Estate Taxes Are Coming to China

iFeng: 房地产税真的要来了 购房者慌了还买房吗?

A hot topic in China is how real estate taxes will impact housing, even though widespread real estate taxes aren't due for at least a couple of years. My take is it will have zero affect on a rising market, but it could have an impact if home prices remain flat or decline. The transmission mechanism may come from sales, but more likely rental units. Investors who own several investment properties, currently sitting empty, will have a strong incentive to generate positive cash flow once their home becomes a cash flow negative asset.

China's property registration helps clear market
The new registration system could pave the way for property tax.

Zhang Dawei, an analyst at Centaline Property, a real estate agency, told Xinhua that some Chinese cities are seeing more luxury apartments for sale as the registration system moves forward. Speculative investment in the property sector might flow into other sectors on expectation of a property tax raising the costs of holding property assets.

As land becomes more scarce, traditional revenue through land sales by local governments will become difficult to sustain. "In such circumstances, a property tax will become inevitable, but only after a unified registration system is in place," said Hu Jinghui, vice president of China's major real estate agency 5i5j.com.

"The data collected through the system will allow new taxes, such as a property tax and an inheritance tax," Hu said.

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