Incoming Chinese Property Tax Will Stimulate Frantic Speculation, Before Crushing It

Chinese website 163.com reports that the Chinese government is planning to launch a property tax by 2012, based on a meeting held by the Ministry of Finance in Beijing.

Capital Vue:

An unnamed source from a local tax bureau said that one of the reasons for the current state of skyrocketing home prices was due to the fact that more taxes are levied in the development period of real estate projects.

According to the source, the government should consider levying taxes when properties are sold and during the holding period.

The government has already begun to clamp-down on its property market this year, but the above shows how China is planning to reduce housing’s appeal as a speculative investment even over the medium term.

Thing is, speculators will be incentivized to take make transactions before the tax takes effect, since a property tax will increase the cost of holding property. Thus one wonders if this incoming tax could stimulate speculative property transactions ahead of it, before sharply curtailing them.

FLAT: China Vanke (200002 CH, in blue)

DOWN A LOT: Poly Real Estate (600048 CH, in blue)

DOWN A LOT: Beijing North Star (601588 CH, in blue)

DOWN: Country Garden Holdings (2007 HK, in blue)

SLIGHTLY DOWN: China Resources (1109 HK, in blue)

FLAT: Shimao Property (813 HK, in blue)

SLIGHTLY DOWN: Guangzhou R&F (2777 HK, in blue)

DOWN A LOT: Shenzen Investment (0604 HK, in blue)

A WIINNER!: Soho China (410 HK)

Most major Chinese property stocks are underwater so far this year.

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