During the past few months there has begun to be more speculation that China would soon relax regulations designed to dampen the real estate sector. However, investors anticipating a return to the rapid sales and startlingly price growth of 2009 and 2010 are likely to be disappointed, and the announcement yesterday of China’s plans to expand the trial property tax to more cities should make this clear.
As far back as October SOHO China’s CEO Zhang Xin told reporters that she expected the government to relax property controls by the end of March 2012. There were further signs of investor optimism about even the downtrodden residential property sector when CBRE last month announced its first China housing investment in four years.
Then when the government lowered the reserve ratio requirement for banks last week commentators such as Shaun Rein were ready to declare that China was reversing its stance from attempting to bring real estate prices down, to trying to prop up developers.
Not so fast.
While I was surprised at how quickly the reserve ratio was lowered, I am not convinced that this is aimed that the real estate sector specifically and the government has made numerous statements about its intention to stay the course regarding restrictions on real estate, particularly in the residential market.
In a phone interview with Bloomberg on December 7th, Jia Kang, head of the Chinese Finance Ministry’s research institute for fiscal science said,
The government will discuss the experiences from the property tax trials in Shanghai and Chongqing at the end of the year and may discuss an expansion plan then. The conditions for extending the property tax nationwide are still not ripe.
Given that senior Chinese officials seldom do so much as cough without a few levels of approval, I would assume that this statement reflects the viewpoint of a fairly significant segment of the government’s fiscal apparatus.
Also, according to a report citing Jia in the China Securities Journal on Wednesday, China may decide and announce a plan to expand the property tax trials to other cities at the end of the year. The researcher told Bloomberg that the newspaper may have misquoted him.
So don’t be rushing out to buy those new apartments just yet.
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