The Chinese Communist Party did not mention real estate tax at the recently concluded “two sessions”, but the draft of the 14th Five-Year Plan and the 2035 Visionary Goals, which was submitted for review on March 6, proposed to promote real estate tax legislation. A real estate professional platform analysis, for people with multiple properties, under the premise of tighter and tighter regulation of the property market, the future may face three major bad news.
China’s real estate professional online platform “Housing World” reported on March 11, citing data from the Communist Party’s Central Bank’s “2019 Survey on Household Assets and Liabilities of Urban Residents in China,” that China’s urban residents’ Home ownership rate reached 96.0%, with an average of 1.5 sets of housing per household, including 58.4% of households with one set of housing, 31.0% of households with two sets of housing, and three or more sets of housing 10.5%.
Housing World believes that 40% of households with two homes will face three major “bad news” in the future.
First, the future may impose a real estate tax, the more houses pay more taxes.
The two sessions of the Communist Party of China (CPC), which ended on March 10 this year, still did not include real estate tax in the legislative agenda, but the 14th Five-Year Plan and the 2035 Visionary Goals, which were submitted to the CPC National People’s Congress for consideration on March 6, raised the issue of promoting real estate tax legislation.
In his article “The Property Tax is Approaching,” published on January 4 this year, renowned economist Cheng Xiaonong pointed out that the Chinese Communist government is not an elected government, and the public has almost no binding power over the Communist Party. Once the government needs to introduce a property tax for urban households, its need will become law and be enforced.
Cheng Xiaonong said that as early as 2017, the CCP had included the real estate tax in its five-year legislative plan, but since then “only the stairs have sounded, but no one has come down,” but the authorities’ “Opinions on Accelerating the Improvement of the Socialist Market Economic System in the New Era” released on May 11 last year mentioned that real estate tax legislation should be pushed forward steadily.
On Dec. 21, 2020, the China Housing Development Report (2020-2021) published by the Institute of Financial and Strategic Studies of the Chinese Academy of Social Sciences predicted that the increase in commodity housing prices may drop this year and suggested accelerating the introduction of a real estate tax. In the article, it was mentioned that the local tax sources should be cultivated and the real estate tax legislation and reform should be actively and steadily promoted in accordance with the principle of “legislation first, full authorization and step-by-step advancement”.
According to Cheng Xiaonong, Liu Kun’s expression is obvious that the property tax is getting closer and closer.
An article in Sohu Finance titled “It depends on Xi Jinping whether the property tax will come out or not” writes that opponents of the property tax believe that the premise of the property tax is the privatization of land and that the tax can only be levied on houses with freehold property rights, which is not legally feasible at present; moreover, the types of houses in China are too complicated, with more than 20 kinds of small property rights, military property rights and public housing, so the property tax is not operable.
According to the article, the obstruction of vested interest groups is also a big problem. Nowadays, everyone has a house, and the key is that most of the powerful people have a lot of houses, so they will definitely block the launch of property tax.
The article also mentioned that Chen Huai, director of the China Institute of Urban and rural Construction Economics, had asked Beijing Normal University professor Dong Fan rhetorically, “Is it difficult to introduce a property tax?”
According to the article, it is not easy to say whether the property tax will come out during Xi Jinping’s term. But if Xi wants to push the property tax, it will definitely be launched. The problem of inoperability and obstruction by interest groups is not a problem at all, even the big tiger can be knocked out, Xi Da can still be difficult by the property tax?
Second, second-hand houses will become “hard to sell” in the future.
The Housing World quoted the survey data of the Chinese Communist Party’s Bureau of Statistics as saying that the area of commercial residential houses for sale in China is 224.16 million square meters, the current construction area of commercial residential houses is 60,703.31 million square meters, and the area of new construction of commercial residential houses is 1,171.93 million square meters. If we calculate according to 100 square meters per house, there are about 70 million houses for sale in the future.
For people who want to buy a house, there are a lot of new houses to choose from, and this phenomenon may directly “press down” the price of housing, not only can’t sell, but also may appear “property for free” phenomenon.
After the New Year of 2021, the news of “free property in Yanjiao Tianyang City” was circulated on the internet, followed by many “behind-the-scenes” stories, some saying that the owner had to give it away for free because he was “unemployed and bankrupt”, and some saying that the owner had to give it away for free because he was “unemployed and bankrupt”. Some said the owner had to give it away for free because he was “unemployed and bankrupt”, some said the owner “bought the house at a high level in 2017 and the total amount of housing reached 4.2 million yuan” and so on.
According to the “New Beijing News” reporter verification found that the news is true. The owner of the 40-square-meter house in Yanjiao, Hebei, is ready to give it to someone else because he is “insolvent” and has more than 700,000 loans left.
In April 2020, news broke that a 93-square-meter house in Yanjiao’s Yixiang District was being given away for free because the remaining mortgage payments on the house had far exceeded the price of the house, making it a negative asset, according to a Feb. 8 report in 21st Century Finance.
Third, China’s house prices may be adjusted in the future.
The housing world analysis says that in recent years, the real estate control policies in first and second-tier cities have been tightened, and a variety of strict restrictions have begun to be imposed on local home purchases. Many hoarders are unable to “hoard” houses in big cities, so they turn to some small cities without purchase restriction policies to hoard houses. Due to the change in supply and demand, this also allows some third and fourth-tier small cities have a certain increase in housing prices.
However, many small cities do not have a lot of people who just need to buy a house, but a large population loss, which will cause the real estate in small cities is difficult to realize. With the tone of “housing is not speculative”, the prices of small cities in the third and fourth tier will not have a lot of room to rise, hoarders will not only “lose money”, the house may not be sold.
In recent years, property in many Chinese cities has been sold at “cabbage prices”.
21st Century Finance reported on September 9, 2020 that in at least 12 cities, including Hegang, Shuangyashan, Jixi, Qitaihe, Jiamusi, Daxinganling in Heilongjiang, Shizuishan in Ningxia, Bozhou in Xinjiang, Yumen in Gansu (once a prefecture-level city, now downgraded to a county-level city under the administration of Jiuquan City), Tongchuan in Shaanxi, and Fuxin and Tieling in Liaoning, the lowest prices are below 100,000 yuan!
In Fuxin, Liaoning, for example, a 56-square-meter second-hand house sold for only 20,000 yuan, the average price of more than 300 yuan per square meter, netizens said, “the house sold out of the cabbage price.
The “cabbage house” is located in the Mijia district, about 20 minutes drive from the center of Fuxin. And in a property website search “Mijia District” can be found, five sets of 50 to 60 square meters of properties for sale, the cheapest total price of 40,000 yuan, the most expensive is only 100,000 yuan.
The 20,000 yuan house in the Mijia neighborhood is still a lot. The agent for a few minutes to find out 5 sets of second-hand houses in different locations and neighborhoods, the area from 38 square meters to 55 square meters, the average price per square meter is also between 300 yuan and 600 yuan.
The agent said, “cheap 20,000 yuan on sale, expensive 25,000 yuan, but also down to negotiate some prices.”
Xu Xiaole, chief analyst of Shell Research Institute, analyzed that most third and fourth-tier cities real estate market have experienced the stage of high pressure of inventory and de-stocking, the market development momentum is weak, and consumers should not have too high expectations for property investment appreciation.
The housing world concluded that the future real estate market will be a more suitable market for just home buyers, families with 2 suites or more, if they are hoarding, or to make early plans.
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