| Shanghai slaps tax on property sales |
| Wednesday,March 09,2005 Posted: 14:21 BJT(0621 GMT) |
| BEIJING, Mar. 8 -- Shanghai had become China's first city to slap a tax on gains made on the sale of property held for under a year as the country fought an escalating investment bubble, domestic media and analysts said Monday.
The tax bureau in Shanghai would levy a 5.5 percent capital gains tax on the sale of real estate held for less than 12 months starting this month, the Shanghai Daily reported. That represented the first concrete measure targeted at rampant property speculation, particularly in Shanghai, analysts said. The government had singled out property since mid-2003 as being among a handful of overheated sectors, fearful that heavy speculation could put upward pressure on the yuan and exacerbate bad debts already in the banking system. "It's sending a signal that the government is watching ... Shanghai property prices now," JP Morgan economist Frank Gong said. This is "an indication that the Shanghai Municipal Government has been facing huge pressure from the Central Government to cool off its property market". Buoyed by luxury property prices that have as much as doubled in the past year by developers' reckoning, real estate players from Singapore's CapitaLand to Hong Kong's Kerry Properties are building in Shanghai at a prolific rate. Average housing prices in Shanghai stood at 5,118 yuan (US$618) per square meter — the mainland's second-most expensive city, domestic media reported. But developers have said prices could soar as high as US$5,500 per square meter at the luxury end. At any rate, economists said the tax levy would not be enough to cool red-hot property speculation in Shanghai driven both by overseas investors and well-off Chinese. "China can and should impose 80 percent tax on capital gains for property flipping — selling within one year of acquisition," said Andy Xie, an economist at Morgan Stanley. "Speculative hoarding is now a major force in pumping up property prices. When the property bubble bursts, the banking system could suffer enormously," said Xie. Mortgages count among the best-performing loans on the books of Chinese lenders, but their novelty — home ownership took off only after the government scrapped a State housing system in 1998 — means there is little data on asset quality. China's banks currently hold over 1 trillion yuan in mortgages, a total JP Morgan expects to more than triple by 2008. (Source: Shenzhen Daily/Agencies) |
| (Source: English Site of Kuching) |
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