From "Risk check-up: Gauging the housing market’s health" by Andy Rothman, China macro strategist, CLSA, May 12
There has been a great deal of speculation that the Chinese government is about to introduce a nationwide property tax. In our view, a tax is coming, but is unlikely to be rolled out within the next four quarters because implementation is complicated and the administrative framework is not yet established. Given the wide range of tools that Beijing already has at hand for intervening in the property sector, it does not need a tax to cool off prices and transactions. And a property tax is not necessarily a significant negative for the sector; it all depends on the effective tax rate. Most developed markets have some form of property tax, which provides a steady source of government revenue … In Hong Kong, for example, there is a 16% tax on rental income, but this can be offset by deductions for other taxes paid on the property and expenses such as repairs. There is also a 5% annual tax on the assessed value of the property, but the assessed value is often far below the market value. In the end, the effective tax rate has been low enough that it has not greatly inhibited sales volumes. When a property tax comes in China, we expect it will be used primarily to provide a steady revenue flow for local governments, not to penalize home ownership or real estate investment. (At the outset of implementation, however, the tax may have a negative impact on equities in the sector, which tend to be volatile.)
From "Trip to Ordos: ‘China’s Dubai’" by Lu Ting, economist, Bank of America Merrill Lynch, May 10
The sudden surge of wealth in Ordos is not only visible there, but has apparently found its way into top-tier cities too. The new wealthy class has invested heavily in properties in Beijing. They have also invested in Hohhot, the capital city of Inner Mongolia, but to a lesser extent. But the Ordos government has been determined to stem the capital outflow. Its strategy is to invest massively in local infrastructure and urban expansion to attract coal bosses to buy local properties. In this regard, Ordos has been successful. The old town has expanded three-fold over the past decade and homes in the new town are all sold out. There is one important fact about the local property market. Despite being depicted [as a] "ghost town," … all homes in the new town are sold out. A couple of days before our visit, all the units in a newly finished estate were sold within just one week. Leverage is not high there, as local banks are underdeveloped and many home buyers simply pay cash. Home prices have risen to RMB7,000 per sq meter in the old town and around RMB6,000 per sq meter in the new town. Though it might be expensive compared with other similar-tier cities, home prices in Ordos are definitely much cheaper than top-tier cities like Beijing and Shanghai. If we take into account Ordos’ high GDP per capita, its home prices are not out of sync.