Has the Chinese government just proven itself unwilling to prick its property bubble?
The government has just announced that they won’t go ahead with an expected tax on holdings of more than one property, a tax which was hoped to reign in speculators.
“Taxes on holding of residential properties is impossible at least for another three years,” Huang Hanquan, assistant director of the industrial institute of the National Development and Reform Commission (NDRC), the nation’s top economic policy making agency, was quoted by China Times as saying on Sunday.
As China’s home prices continue to soar amid growing public complaint, the authorities have issued a series of tightening policies, with some experts forecasting that taxing more than one residential property could deal a final blow to the housing sector.
The new tax, which is quite similar to a property tax, will increase the cost of holding more than one apartment and thus prevent speculation, which is considered the major factor for surging home prices.
Huang’s comment, if true, would be the latest official confirmation that no further major tightening measures are in the pipeline.
Chinese laws have such taxes on commercial properties, but changes in the taxation on residential housing would require revision of existing laws, which would first need to get the nod from the central government, Huang said.
This despite that fact that prices are still soaring.
The concern seems to be that damage to the property market would hurt both the country’s stock market and economy, but this move would seem to only embolden speculators for another few years, who could make the bubble far larger and more painful to prick in the future.
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