What’s new: China will not expand the pilot property tax trial this year, putting on hold a real estate reform that could burden local property markets and add to liquidity pressure on developers.
Although some cities have carried out investigations and preliminary research for the program, the conditions for expanding the pilot cities for the property tax reform “are not available this year considering all aspects of the situation,” according to a report by the state-run Xinhua News Agency, which cited the Ministry of Finance.
The statement is seen as a signal to stabilize investor expectations toward the property sector, which has already been mired in debt crises.
China’s national legislature in October authorized a five-year pilot program to test a new property tax in some regions, without specifying the regions. Industry participants previously expected the measures to be introduced this year.
Analysts have previously said that while the pilot would disrupt some cities’ property markets in the short-term, it would likely pay economic dividends in the long-term, such as putting local government finances on a better footing.
The background: At a meeting chaired by Vice Premier Liu He on Wednesday, top financial policymakers called for timely, effective plans to prevent and resolve risks around real estate developers, as well as policies to help the industry transform to a new development model.
This is part of the government’s promise to introduce policies to stabilize capital markets and stimulate economic growth in response to a stock market sell-off over risks from the property market, internet companies and overseas IPOs.
Read more
China’s Pilot Property Tax Reforms Benefit Markets Despite Short-Term Pain, Analysts Say
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
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