China stops expanding pilot real estate tax tests

Shanghai, China, March 17 Chinese authorities announced that they have suspended the extension of the pilot test plan for the harmonized property tax this year, a plan that began in October last year, economic news portal Yicai reported today. The Ministry of Finance stated that “the conditions were not met” to expand the list of cities where such tests will be carried out. According to experts quoted by local media, Beijing's priority is to stabilize the economy, especially the real estate sector, taking into account factors such as the current outbreak of Covid-19 in the country before pursuing a real estate tax reform plan. The initiative sought to “guide the rational consumption of housing and the economic use of land resources” and “vigorously and carefully promote the “legislation and reform of property tax” to “promote the stable and solid development of the national housing market”. The decision to suspend the implementation of the 2022 plan was made public on the day when the Committee for Development and Financial Stability of the State Council (the Chinese Administration) urged real estate companies to “timely, robust and effective solutions” to prevent and resolve risks “Progress of measures that allow the transition to a new development model”. The Chinese real estate sector began to overheat in the late 1990s. At that time, regulators opened their hands to developers eager to take advantage of the Chinese brick 'boom'. Due to restrictions on capital outflows and volatility in local stock markets, real estate has become one of the preferred investment vehicles in China. Partly because there is still no domestic property tax. 75% of the debt. On the sidelines, authorities have regulated the sector to control excessive expansion in recent years, forcing companies to increase discounts to reduce debt and maintain liquidity. This caused a debt crisis like the one faced by real estate giant Evergrande, and authorities had to intervene in the face of debt exceeding $300 billion and several defaults on offshore bonds. Some experts estimate that the direct and indirect share of the real estate and construction sector amounts to 20-30% of the country's GDP. It is also believed that between 13% and 22% of urban housing across the country is empty, especially in smaller cities; In the face of a slowdown in housing in the second half of 2021, some local authorities have come to set restrictions on how much prices can fall in order to “maintain stability” in the market.