Minister backs rollout of property tax

The most-needed measure to control housing prices in the world's second largest economy is to impose a property tax on third and subsequent homes, a senior government official said at a forum over the weekend, suggesting that the long-expected measure could soon be rolled out nationwide.

"What needs to be considered most is a property tax on existing homes," Hu Cunzhi, vice minister of land and resources, said at the China Development Forum held in Beijing Saturday.

Hu said a property tax could target people who have more than two homes. Administrative controls, such as purchase limits coupled with tax measures, can be effective in reining in the investment-driven housing prices, he said.

Imposing a property tax would make investment in additional houses less valuable and prompt property owners to sell, which would release more homes onto the market, Hu said. Hu also suggested that taxes on transactions could be cut.

The real estate sector will reach its peak of development by 2015 when the average number of properties per family is expected to be 1.08 units, but after that the best time for the sector will be gone, said Ren Xingzhou, director of the Market Research Institute of the State Council Development Research Center, at the forum.

Based on data from the sixth nationwide population census in 2010, the average number of properties per family had reached 1.02 units, she noted.

Housing prices in major cities have rebounded since the end of 2012, despite the government's tough measures to rein in the market. Property prices in major cities such as Beijing and Shanghai are beyond most residents' lifetime savings.

China's housing market has formed a bubble, and it would be disaster if the bubble burst, Wang Shi, chairman and founder of property development firm China Vanke, said in a recent interview with CBS News.

In early March, the central government announced a new 20 percent tax on capital gains from secondhand home sales, in a bid to fight against speculative investment.

But the measure has been widely criticized for boosting housing transaction costs and effectively raising prices for buyers of secondhand homes. So as prices are still rising, many expect that the government will have to levy property taxes to control the overheating market.

China has already launched property tax pilot schemes in Chongqing and Shanghai in January 2011. However, the policy affected a relatively small group of people and the low tax rate turned out to have little effect on the local market.

Different tax rates should apply to property owners based on the number of houses they have, Yin Bocheng, director of the real estate research center at Shanghai-based Fudan University, told the Global Times Sunday.