China today launched a long-awaited property tax in two of the country's biggest cities.
People buying higher-end second homes in Shanghai, China's wealthiest city, and Chongqing, home to 30 million people and the country's fastest-growing municipality, now have to pay a 0.4-1.2% annual tax, officials said.
Earlier this week, the government hiked the minimum downpayment for second homes to 60% from 50% and ordered authorities to rein in property prices as it moved to quell growing public angst about high property costs.
The taxes will have limited impact on curbing property prices, but they will affect the speculators who helped push up housing costs, said Chen Sheng, deputy director at China Index Academy, a property research firm.
'It is a historic breakthrough because it is the first time in China that people need to pay for holding real estate assets,' Chen said.
The two cities announced different tax pilot projects almost immediately after the State Council, China's cabinet, said it had approved the trials yesterday.
Shanghai announced a flat 0.6% tax on new second homes that are double the average market price. New second homes costing less will be subject to a 0.4% tax.
Chongqing introduced a progressive tax ranging from 0.5% for homes that are double the market average price and rising to a maximum of 1.2% depending on the value of the home.
The finance ministry said that if conditions were right, the property tax would be expanded to the rest of the country.
Property prices in China's major cities posted their fourth month-on-month rise in a row in December and sales picked up pace, according to the latest government figures. Prices in 70 major cities were up 0.3% last month from November and 6.4% higher than a year ago.
The annualised surge peaked in April, when prices soared 12.8%, but growth has since slowed.
Prices have remained stubbornly high, despite a range of government measures such as hiking minimum down-payments on property transactions to at least 30% in a bid to avoid a damaging price bubble.
