China's pilot program of a five-year property tax is a step toward healthier growth and the goal of common prosperity, and is unlikely to trigger major long-term fluctuations in the real estate market, economists and industry insiders said.
On Saturday, the Standing Committee of the National People's Congress, the nation's top legislature, adopted a decision to authorize the State Council, China's Cabinet, to launch pilot property tax reforms in designated regions. The pilot program will last five years and start when the State Council issues details of the program, according to the decision.
The program will advance property tax legislation and reform in an active and prudent way. It will help guide rational housing consumption and economical and intensive use of land resources, and facilitate the steady and sound development of the country's property market, the decision said.
Jia Kang, chief economist of the China Academy of New Supply-Side Economics, said he believes the pilot program will contribute to a healthier, more stable development of China's real estate market and formulation of a long-term mechanism for growth. Information and experiences from the pilot program will play a key role in drawing up national property tax legislation.
"It will help in the accumulation of diverse experiences from different localities, which is key to making sound preparation for establishing a long-term mechanism for real estate regulation," Jia said, adding this will help the central government develop an overview.
The aim of the pilot program is not to curb the growth of the real estate market, but to help build a long-term mechanism that is conducive to the market's healthy development, Jia said. The program will reduce vacancy rates, improve land use efficiency and make housing more affordable and accessible in the long run, he said.
The State Council will decide on the list of pilot areas under the principle of promoting unified legislation and advancing the steady and sound development of the property market. The State Council is authorized to formulate details for the implementation of the pilot program, while local governments in pilot areas will be mandated to implement the specific details.
Xu Xiaole, chief market analyst at Beike Research Institute, a research body of Ke Holdings, an integrated online and offline platform for housing transactions and services, said the pilot program is not expected to bring about notable fluctuations in the real estate market in the long run, as the "trading price and volume of real estate is mainly decided by its supply and demand fundamentals".