Massive increase in public housing investment and introduction of property tax

Many speakers pointed out that investment in public housing and introduction of a property tax could be the key solutions to stabilize the property prices. They are optimistic that the construction of 10 million public housing units will start, and RMB1.4tr will be invested in this program this year. Under this program, 70% of the land supply will allocated to affordable housing and small-size commodity units; the total land supply in 2011 will increase 2.6 times historical average.

Although the property tax proposal is opposed by various interest groups, several local governments will nevertheless go ahead to introduce the tax in the near term. Chongqing Municipal Government is likely to start implementing a pilot property tax scheme with respect to high-end residential properties in Q1 this year. The scheme will likely involve a tax on high-end properties (including large-sized units and villas). Shanghai is also likely to introduce a property tax in the very near term. A possible version for the Shanghai property tax is a levy on newly purchased third homes. Following Chongqing and Shanghai, Shenzhen is likely to be the next to slap on a property tax. In addition, those convicted of land hoarding are likely to be severely punished. More cities are likely to introduce policies to limit the number of units to be purchased by each household, if m-o-m property inflation exceeds a certain rate.

• [Editor:editor]