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Source: Reuters

UPDATE 1-China looking at possible property tax

Published: 29 Mar 2010 02:54:00 PST

* Government steps up property tax preparations

* China sees quicker pace of urbanisation in 5-10 yrs

* Trend for property prices to rise further is clear-cut

BEIJING, March 29 - China is stepping up preparations for a property tax, an official said on Monday, but he stopped short of saying a final decision had been taken.

Debate on the merits of a tax, which would be levied annually on the value of a property, has intensified in recent months.

Advocates say it would dampen speculative buying and hoarding of property, thus dampening house price inflation, and would give local authorities a more regular source of revenue.

"Actually, as far as I know, related government agencies are speeding up the process of introducing a property tax," said Leng Hongzhi, director of of land utilisation at the Ministry of Land and Resources, told reporters.

Property prices across China rose 10.7 percent in February from a year earlier. Beijing has tweaked and stiffened mortgage rules in recent months to head off real estate inflation.

House prices in some big cities have soared beyond the reach of many ordinary Chinese, fanning criticism online and heightening worries within the ruling Communist Party about the potentially destabilising impact of income inequalities.

Zhang Qin, a deputy director of the Ministry of Housing and Urban-rural Development, said property prices in China would go up further, bolstered by robust and inelastic demand.

"The growth trend of property prices is clear, taking into consideration the imbalance between supply and demand in the market and the uneven distribution of land resources between eastern and western provinces," Zhang said at the same news conference.

She said more and more Chinese would leave the land and move to cities in the next five to ten years; the urbanisation rate, now 46.6 percent, was likely to top 50 percent during the 12th five year plan, which spans 2011 to 2015.

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