Pilot property tax may expand to cool market

New home prices in 100 major cities averaged 10,442 yuan ($1,706) per square meter in August, rising for 15 consecutive months in month-on-month terms, and indicating the recovery of the property sector, a survey has shown.

Of the 100 cities tracked by the China Index Academy, the research arm of Soufun, China's largest property website, 71 cities posted month-on-month increases, with 31 of them seeing prices rising at a pace above 1 percent, two cities fewer than in July.

The other 29 cities saw monthly declines, 10 cities fewer than in the previous month. Of those, 14 cities saw drops more than 1 percent.

On an annual basis, new home prices in those 100 cities increased 8.61 percent on average, 0.67 percentage point higher than in July.

Among the 10 largest cities, Beijing saw the biggest property inflation with a 3.22 percent month-on-month increase in August, trailed by Wuhan, Hubei province, which posted a 2.16 percent month-on-month increase.

On a year-on-year basis, new home prices in the 10 top-tier cities grew 12.18 percent in August, extending the period of gains to 10 months and pointing to robust housing demand.

"It's increasingly less likely that we'll see new tightening measures in the property market, and investors and homebuyers are returning to the market and pushing up prices because of the limited supply," said Huang Zhijian, chief analyst at Shanghai Uwin Real Estate Information Services Co.

Loosened purchase restrictions in Wenzhou, Zhejiang province, and Wuhu, Anhui province, have sent signals lately that a relaxed policy environment might be in the works by local governments, and trading is now more active than a few months ago, said the report.

In August, Wenzhou quietly loosened purchase restrictions in the housing market by allowing local and non-local residents to buy second homes, while Wuhu decided to abolish transfer taxes and start paying a 20,000-yuan subsidy to undergraduate homebuyers with three-year work experience in the city.

Zhang Dawei, research director at real estate company Centaline Group, said there will likely be more cities following those moves across the nation to ease purchase restrictions. Local governments rely heavily on the property market, a key driver of economic growth and a cash cow for them, Zhang added.

However, Hui Jianqiang, research director of Beijing Zhongfang-yanxie Technology Service Ltd, said that Wenzhou and Wuhu tweaked the policies to stop the continuous fall of home prices in the two cities.

Wuhu saw the heaviest losses in the home price list after shedding 2.29 percent month-on-month, while Wenzhou saw home prices decrease 0.31 percent.

Xu Shaoshi, minister of the National Development and Reform Commission, said in a report delivered to a meeting of the Standing Committee of the National People's Congress on Aug 28 that the government will launch pilot property tax programs in more cities.

"There will be between six and eight more cities with trial property tax programs this year, with some of them possibly levying the tax on pre-owned homes," said Chen Sheng, vice-president of the China Real Estate Data Academy.