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China discourages real estate
speculation
BEIJING - In
what economists say is a major step towards
discouraging real estate speculation, China has
decided to levy a business tax on the full profits
from house sales if owners sell them within two
years of purchase. The government will also levy a
business tax on the difference between the
purchase and resale price of non-ordinary
residential housing, if owners sell properties
more than two years after their initial purchase.
However, sales of ordinary homes will not be
subject to this tax.
Wang Zhao, a senior
researcher with the State Council Development
Research Centre, said the latest measures, which
were announced on Wednesday in a circular jointly
issued by seven government departments, were
targeted at excessive real estate investment and
rising housing prices. Healthy development of the
real estate industry is crucial for economic and
social development, Wang said. The government
needs to use taxes and other economic measures to
adjust the real estate market and curtail housing
purchases made for speculative and investment
purposes, he added.
China's average
housing prices rose 14.4% last year, despite the
government taking a series of macro-control
measures, including an interest rate hike, to cool
the market. Average housing prices rose a further
12.5% year-on-year during the first quarter of
this year.
According to Niu Li, a senior
economist with the State Information Centre,
housing prices have risen too quickly, creating
bubbles in the market. "If the government does not
deal with them properly, the bubbles will result
in a series of economic problems," he said.
Last month, Premier Wen Jiabao presided
over a State Council executive meeting, during
which the government said it would take eight
measures, including tax policies and strict land
controls, to beef up macro-control over the real
estate sector. But only a few details were
revealed at the meeting.
According to the
latest circular, the government will beef up its
management of land supplies. Owners of land
remaining undeveloped one year after the date of
purchase will be charged a land idling fee. For
those still undeveloped two years later, the right
to develop will be revoked. Also, to ensure a
sufficient supply of medium and low-cost housing,
the government will clarify requirements on price
levels and housing sizes before giving permission
for land use.
Wang said the raft of
measures would help stabilize the country's
housing prices. However, he pointed out that the
government could not rely on the business tax
policy (announced in the circular) alone to adjust
the market, adding that "the tax policy will have
an impact on trade activity." But for the
long-term development of the country's real estate
market, the government should implement a unified
real estate tax as quickly as possible, he said.
Currently, China's real estate-related
taxes and fees are mostly collected during the
period of development and investment. The taxes
and fees collected during transactions and after
the houses are occupied are relatively low.
Vice-Minister of Finance Xiao Jie said in March
that the government is considering imposing a
unified real estate tax to solve the issue.
Economist Peng Longyun at the Asian Development
Bank said the unified tax could help regulate the
market and lower home prices.
(Asia
Pulse/XIC) |
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