More bad news could be on the way for China’s property market early next year, as the government will reportedly implement a long awaited national real estate registry in March.
The nationwide log of who owns what properties is expected to a be a major deterrent to corrupt officials hiding wealth in real estate holdings, as well as giving the government greater transparency into transactions nationwide. The real estate registry is also part of scheme to begin taxing property holdings.
According to a report in a local media outlet, the new register will share property locations, owners’ names and domiciles among the police, tax department and other government auditing agencies in real time.
In May this year China established a new government office under the Ministry of Land and Resources to manage the register and it began being implemented on a trial basis in June. The report in thepaper.cn, cited unnamed government officials as saying the new system will be rolled out nationwide on March 1st.
Xi Has a New Net for Tiger Hunting
The new property registration system could have a major impact on the property market in a nation where much of the wealth generated over the past twenty years has been reaped through links to the government.
Even during the first half of this year officials with the country’s largest developer, China Vanke, were citing Xi’s campaign to pursue both “tigers and flies” in his anti-corruption drive as a major drag on the market for high-end properties.
Some of the biggest headlines in Xi’s campaign have centred on the property holdings of fallen officials, and government investigators have combed through real estate records this year when checking up on suspected malfeasance by party members.
The charges this year against former Politburo member Zhou Yongkang included the real estate wealth amassed by his family, and former Guangdong party chief Wan Qingliang also was found to have colluded with real estate developers.
Even in the case of more minor officials, real estate has been among the favorite hiding places for ill gotten loot, with a manager from a local water company in Hebei recently having been exposed as building up a property portfolio of 68 homes, in addition to RMB 120 million in cash and 37 kilos of gold.
Moving Towards a Property Tax
One of the major attractions of real estate investment in China has been the lack of a tax on property holdings, which has kept the carrying costs of low on property portfolios.
However, the government has been trialling property tax systems in Shanghai and Chongqing since 2011, and has repeatedly stated its intent of taking such systems nationwide.
While there are still significant obstacles to implementing this new property tax, real estate registry is seen as an integral tool of making the new tax system practical.
Potential to Increase Supply of Second-Hand Homes
Although many owners of multiple homes have learned to stash housing under the names of relatives and friends, the new registry will make this considerably more difficult. And this difficulty is likely to push new supply of previously owned homes onto the market.
With relatively few alternative financial avenues available in China the clampdown on home ownership rules could also spark greater interest in overseas property purchases among wealthy Chinese.