Shanghai's Property Tax to Have Limited Effects on Market

The Shanghai municipal government has announced details about its property tax rates in an effort to cool property prices in the Chinese economic hub.

Although some experts say the new tax rates might prompt some buyers to have second thoughts about purchasing new homes, others believe they will have a limited impact on the property market.

Ying Ying has the details.

The new property tax rates in Shanghai indicate that properties priced at or below 28,426 yuan per square meter will incur annual taxes equal to 0.4 percent of their total value, while those priced higher will be assessed a tax rate of 0.6 percent of the housing price.

For example, if a person buys a 100-square-meter apartment for 30,000 yuan per square meter, and the buyer's family already owns total housing space exceeding the average 60 square meters, that person will pay an annual housing tax of 12,600 yuan.

But if he buys a same-sized apartment at 28,426 yuan per square meter or less, he will pay 5,000 yuan less in annual taxes.

Yao Lingzhen, Deputy Director of the Real Estate Institute at Shanghai Finance and Economics University, says the 5,000-yuan tax difference will affect people's decisions about buying a home.

"If a family is buying two apartments, one for current living and the other for their child when he or she grows up, the 5,000 yuan will make a big difference for them. They might have second thoughts and instead buy their child a smaller apartment, an older one, or a more remote one."

One Shanghai resident shares Yao's sentiments, saying the new tax rates have prompted her to change her home-buying plans.

"I will consider buying an apartment that falls in the 0.4-percent tax range instead of the 0.6-percent tax range. I'll buy a home in a relatively remote area like the suburbs."

But Xue Jianxiong, an analyst from China Real Estate Information Corporation, says the progressive property tax will have a limited effect on the property market.

"There were only about 10,900 apartments that cost more than 28,426 yuan per square meter last year, accounting for only some 13 percent of the total on the market. This means the 0.6-percent tax applies to only 13 percent of apartments, while the 0.4-percent tax applies to the other 87 percent."

Statistics indicate that fewer than 200 new homes costing more than the threshold price were sold in Shanghai between January 28th and February 22nd.

For CRI, this is Ying Ying.