Shanghai Plans Property Tax to Curb Housing Prices

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SHANGHAI, Apr. 12 – The city government of Shanghai may impose a property tax on investors owning multiple properties, aiming to curb price gains and moderate the housing market.

The government has already completed the basic outline of the property tax, which targets speculative investors owning more than one property for capital appreciation, together with the previous measures of a 5.5 percent business tax on second houses that are resold within five years. The tax would affect ownership of investment properties and will likely help lower prices. The tax may also apply to existing houses as well as new properties.

With Shanghai’s residential real estate prices increasing 60 percent in 2009, there has been rising concern that property speculation is squeezing the middle class out of home ownership, with more than 70 percent of households believing home prices are “unacceptably high.” The government of Chongqing recently announced a similar proposal to levy special property tax consumption, also aiming to curb speculation.

“Shanghai’s property prices may fall as much as 10 percent this year as the government is tightening measures to cool the overheated property market,” said Colliers International.