China omitted a potential property tax in its 2022 legislative plan announced on Tuesday for the third consecutive year, suggesting authorities are treading carefully to avoid further damaging sentiment in the already beleaguered sector.
Officials initially flagged the creation of a property tax more than a decade ago but the idea has met with pushback from stakeholders including local governments that rely heavily on land sales as a key source of financing.
The last time the Standing Committee of the National People’s Congress, or parliament, included a real estate tax in its annual legislative agenda was in 2019, before the economy was hit by the coronavirus pandemic. No tax was formalised that year.
Premier Li Keqiang also omitted a property tax in the government’s 2022 work report released on Saturday, but confirmed that more policy easing in the sector is coming, though only city-specific and not a full-fledged relaxation.
Pilot Real Estate Tax
Tuesday’s legislative plan did refer to a pilot real estate tax in some regions, without disclosing specifics, which was first announced in October.
Most analysts in a Reuters poll in February said officials are likely to delay rolling out the pilot given the strain on the economy.
China’s property sector, which accounts for about a quarter of gross domestic product by some metrics, is facing multiple headwinds this year as home prices sag and property investment slumps.
Property investment in December fell 13.9% from a year earlier, the slowest since January-February 2020, and home sales by value slumped 17.78%, according to calculations from data released by the National Bureau of Statistics.
New home prices rose for the first time since September on a monthly basis, official data for January showed, driven by improved demand in big cities.
In recent weeks, local authorities have begun easing property regulations to shore up the sector, including allowing smaller down-payments, lowering mortgage rates and cutting the deed tax.
- Reuters with additional editing by Sean OMeara