The frustration that millions of younger, middle-class Chinese face in their desire to own homes in leading cities is what the government hopes to address with a pilot property tax programme outlined on Oct 23. Currently, there are no nationwide taxes on residential property, though Shanghai and Chongqing started levying them on urban homes as part of an experiment in 2011. Curbing housing speculation, which has fed China’s massive property bubble, is key to the pilot’s success, economists said.
“The central problem in China is that buyers think that the government is unwilling to let the market fall,” said NTU professor of economics Tan Kong Yam. “If home prices did drop significantly, it would wipe out most citizens’ primary source of wealth and potentially trigger unrest,” he said, adding that urban Chinese have about 80 per cent of their wealth locked up in residential property.
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