Shanghai may impose a tax on new homes in the first quarter of 2011, while Chongqing may introduce a luxury-property tax around the same time, according to reports.
The Ministry of Finance has agreed in principle to the tax in Chongqing and will leave the city to work out the details, said Xinhua News Agency, which cited unidentified sources from the local National Peoples’ Congress.
Meanwhile, Shanghai’s levy will apply to new homes and takes effect in the first quarter, according to a report from Securities News, which cited unidentified officials from the city’s government.
“Chances for imposing property taxes in those two cities are high, and their plans are in line with the central government’s determination to crack down on property prices,” said Danny Bao, a Hong Kong-based real estate analyst at Daiwa Securities Capital Markets. The taxes may affect around 10 to 20 percent of new homes in the two cities, he added.
Chongqing will likely issue the relevant documents and impose the tax in Q1, said the Xinhua report. It will implement a one percent tax on properties priced at three times the average for the north-west city, said a report from China Securities Journal, which cited mayor Huang Qifan.
“The Chongqing tax rate is quite low, rather than a high one that the market fears,” said Jeffrey Gao, a Shanghai-based real estate analyst at Royal Bank of Scotland Group plc. “The tax only applies to high-end homes, which is not very helpful to crack down on property prices.”
According to a Shenyin & Wanguo Securities Co’s report, the luxury property tax in Chongqing will have limited impact on transactions. The tax of 0.5 to 1.5 percent may be applied to homes of more than 200 sq m, analysts headed by Yin Zi wrote in the report, adding that the plan will likely hurt speculators more than home buyers.