CHONGQING/SHANGHAI -- Authorities of Chongqing and Shanghai municipalities announced Friday they will kick off the long-awaited trial property tax, starting from Jan 28, amid the latest measures to cool off the red-hot housing market.
This came on the heels of another round of tightening measures China's cabinet unveiled Wednesday, including higher down payment, home purchasing restrictions in more cities, and annual price control targets for newly-built homes.
China's real estate market remains overheated, even after a slew of tightening measures last year, including higher down payments, higher lending rates for second-home buyers and two hikes in the benchmark lending rates.
Chongqing will tax all villas as well as new apartments priced at least two times the average price of all newly-built homes in the southwestern city, said Chongqing mayor Huang Qifan.
The annual tax rates are 0.5 percent of the transaction prices for villas and apartments priced less than three times the average price, 1 percent for those priced three to four times the average and 1.2 percent for those priced more than four times the average, Huang said.
For a family, the first 180 square meters (sq m) for villas and first 100 sq m for high-end apartments are exempted from tax, he told a press briefing.
For non-permanent residents who don't work and run companies in Chongqing, their second homes will be taxed at 0.5 percent regardless of the prices, he said.
The city may use the home evaluation prices as the tax bases in three to five years, Huang said.
Shanghai sets property tax rate at 0.4 to 0.6 percent. The newly-bought second and second-plus homes of permanent residents in Shanghai will be taxed if the average floor area per family member of all homes, including the existing ones, is more than 60 sq m, the Shanghai Municipal government said in a statement.
Each family member will have 60 sq m exempted from tax, it said.
All new homes bought by non-permanent residents will be taxed, but the buyers can get all tax returned for their first new homes after they work in Shanghai for three years.
The tax rates are 0.6 percent for housing priced more than two times the average prices and 0.4 percent for those priced less.
The tax bases are 70 percent of the transaction prices now in the initial period and will later be the home evaluation prices, according to the statement.
The levy is designed to help regulate income distribution and promote social equality, and guide reasonable housing consumption for land saving and intensive use, the Ministry of Finance, the State Administration of Taxation and the Ministry of Housing and Urban-Rural Development said in a statement Thursday.
The tax is certain to help stabilize home prices in pilot cities by curbing speculation over the short term, said Yin Bocheng, director of the real estate research center at Fudan University.