The share value of the real estate developers dropped on concern the government will implement a nationwide tax on the value of a property for the first time. Speculation was fueled by a Shanghai Securities News report which said China plans to expand a trial on a real-estate tax, citing an unidentified person close to the State Administration of Taxation.
Jerry Lou, Hong Kong-based China strategist at Morgan Stanley, said in a note China is unlikely to impose such a levy on homes this year because it would likely have an “immediate negative impact” on the property market and the authorities are targeting a “soft landing.”Hingyin Lee, Colliers CRE Plc’s director of research and advisory for eastern China, said at a briefing that China won’t introduce a property tax this year because the government wants to keep the real-estate market stable.
Bloomberg reports the country’s benchmark for property stocks slumped 1.8% today. The Shanghai Property index has lost 27% from last year’s July high as banks reined in lending and the government scrapped a tax break on home sales. It still doubled last year. Note carefully that Chinese Premier Wen Jiabao said at the end of last month the government will use taxes and interest rates to “stabilize” the property market.