A sharp sword is hanging again.
The recent report decided by the conference has been seen by everyone, and once again it includes "improving the real estate tax system."
Considering the document clearly states "to complete the reform tasks proposed in this decision by 2029," this may mean that the introduction of a real estate tax has once again started a "countdown":
There are only 5 years left.
Of course, compared to the "accelerate the legislation of real estate tax and promote reform in due time" stated at the Third Plenary Session of the 18th Central Committee, the word "improve" seems much milder.
It is estimated that it will not be introduced immediately within one or two years. After all, the real estate market has just come out of the ICU.
In fact, the much-anticipated real estate tax legislation was not included in the "Fourteenth National People's Congress Standing Committee Legislative Plan" announced to the public last September. At that time, many insiders said that this was a signal to stabilize the real estate market.
At this moment, what we need to consider is what impact the real estate tax will bring and why it is mentioned again and again?
The real estate tax is a sword of Damocles hanging over the head of China's real estate market for a long time.Every time people felt it was about to fall, it was always tightly held by an invisible "mysterious force," suspended for more than a decade.
The proposal to levy a property tax can be traced back to 2006, when "reforming the real estate tax system" was officially written into the "11th Five-Year Plan."
In 2010, the "12th Five-Year Plan" also mentioned "studying and promoting the reform of real estate tax." At that time, People's Daily published a half-page interview article titled "Actively and Steadily Promote the Reform of Property Tax," in which Ba Shusong concluded a comforting conclusion:
In the long run, the impact of imposing a property tax on housing prices is limited.
In January 2011, Shanghai and Chongqing took the lead in piloting the collection of property tax on individual housing, which has been going on for more than a decade.
In 2018, the real estate tax was written into the government work report for the first time, described as "actively and steadily promoting the legislation of real estate tax." In 2019, the real estate tax continued to appear in the government work report, and the description changed to "actively and steadily promoting the legislation of real estate tax."
From "actively and steadily promoting" to "actively and steadily promoting," there is a strong intention to take action.On October 23, 2021, the Standing Committee of the 13th National People's Congress passed a decision authorizing the State Council to carry out pilot work for the reform of real estate tax in certain regions.
It seemed that the large-scale piloting of real estate tax collection was imminent. However, plans were overtaken by events.
Due to the rapid downturn in the housing market, the real estate tax was also urgently halted, with two emergency brakes applied.
In March 2022, the Ministry of Finance stated that "the conditions for expanding the pilot cities for real estate tax are not met." In September 2023, the "Legislative Plan of the 14th Standing Committee of the National People's Congress" did not mention the real estate tax either.
Furthermore, the recovery of the housing market did not go as smoothly as expected, and confidence could not withstand further blows, turning the real estate tax into a "hot potato."
So far, the narrative about the real estate tax appears to be fragmented and incoherent. However, behind all this, there is a hidden thread that many people have not noticed.
In fact, the preparations for the real estate tax have never been truly shelved and have been steadily advancing!
On April 25 last year, the Minister of Natural Resources announced a major news:
After ten years of unremitting efforts, our country has fully achieved the unified registration of immovable property.
Looking back at the timeline, it is not difficult to find that the relevant work probably started before 2013, in line with the pace of the proposal to pilot the real estate tax.The completion of the unified registration of real estate has objectively provided the basic conditions for taxation.
In simple terms, the imposition of a real estate tax is like "everything is ready, just waiting for the east wind."
Why is the imposition of a real estate tax inevitable in the long run?
Many people may not realize how delicate the current situation is. The "pockets" of local cities are already crying out for being empty.
According to data, in the first half of 2024, the total land transactions in 292 cities across the country amounted to 1012.88 billion yuan, a year-on-year decrease of 30%. More than two-thirds of the cities saw a year-on-year decline in land transfer fees.
The auction failure rate has also returned to above 20%.
It is important to note that the land market in 2023 was already quite pessimistic. This year is another bottoming out on a low base.
Even in first-tier cities, the decline in Beijing and Shanghai is 18% and 17% respectively. Guangzhou and Shenzhen have seen a decline of more than 70%, plummeting dramatically.
In the first half of 2024, out of all 11 residential land plots listed in Guangzhou, only 4 were sold. The total transaction amount was about 6.478 billion yuan, a year-on-year decrease of about 85%.
Among second-tier cities, apart from Wuhan, Jinan, Fuzhou, and others, all other cities are experiencing a decline, with cities like Nanjing, Suzhou, Hefei, and Tianjin seeing a drop of more than 60%.The "land-selling maniac" Hangzhou saw its land sales revenue drop from over a hundred billion to 68.83 billion yuan in the first half of the year.
As of the end of June, nearly 70% of the top 100 real estate companies by sales had not yet purchased land. Even the financially robust central state-owned enterprises, which were previously aggressive buyers, have started to struggle to afford land.
China Resources Land saw a year-on-year decline of 64.9%, Poly Development fell by 72.5%, China Overseas Land & Investment dropped by 67.7%, and China Merchants Shekou Industrial Zone Holdings Co., Ltd. decreased by 66.3%.
As for Vanke, it did not even make it into the top 100 list of land acquisition amounts by equity in the first half of this year.
This year, several listed real estate companies, including Gree Real Estate, Midea Property, Hua Yuan Real Estate, and Guancheng Datong, have sold their real estate development business assets and simply exited the development race, choosing not to play anymore!
The direct consequence of the cooling land auctions is a sharp reduction in local government revenues.
Over the past two decades, the real estate market has experienced ups and downs, with housing prices fluctuating, but overall demand has been continuously expanding. Even during market downturns, it might be possible to survive by enduring for a few years.
Now, however, the overall demand for housing is approaching a state of saturation.
Looking at the experience of developed countries, once the United States, Germany, and Japan entered the "oversupply of houses" phase, the added value of the real estate industry as a percentage of GDP stabilized at around 10%. This is not from new construction but from contributions made by renting, finance, renovation, and second-hand housing transactions.
As large-scale land development and construction approach their end, the land finance system reaches a critical point, and local governments need to find a long-term stable source of income.Real estate tax is a "big killer" used to solve the problem of local tax sources.
In fact, taxes related to real estate have always existed, mainly including 10 types of taxes:
Business tax, farmland occupation tax, urban land use tax, deed tax, land value-added tax, urban maintenance and construction tax, property tax, personal income tax, corporate income tax, and stamp duty.
In the development and construction phase, value-added tax, corporate income tax, urban land use tax, etc. are levied, mainly targeting real estate companies;
In the transaction phase, value-added tax, personal income tax, deed tax, etc. are levied, and the subjects of collection include both real estate companies and individuals who buy and sell houses.
Notice that taxes need to be paid in the development phase, and taxes need to be paid in the transaction phase, but holding is almost cost-free.
Whether you are a family with a few people in a house in urgent need, or a house brother or sister with a double-digit number of property books, or a super-rich person who wakes up from a 1000 square meter bed every day, everyone is the same and does not need to pay taxes.
This is obviously unfair.
For localities, what is more urgent is that the development business is shrinking at an astonishing speed, and the tax revenue from this part will be greatly reduced. Compared with daily consumer goods, the frequency of real estate transactions is very low. Many people may buy a house again after three to five years, or even ten years.
Overall, levying a "real estate holding tax" is undoubtedly the "best solution" to solve the problem once and for all.On the one hand, the tax base is sufficiently large, and on the other hand, it is relatively stable. Even if housing prices fall within a certain range, the overall amount remains considerable.
So, when will it start to be levied?
Firstly, it is highly unlikely to start levying immediately.
The scene of multiple cities selling off properties following the previous news is still fresh in memory.
Before the official announcement of the "pilot reform of real estate tax" in October 2021, there were already well-informed individuals selling their properties. In Guangzhou, the number of second-hand housing listings increased by more than 8,000 units in just over a month. In Beijing, some property owners who held multiple houses terminated their rental agreements in advance, preferring to pay a penalty fee rather than waiting to sell their houses.
It is imaginable how many people would sell off their properties if a real estate tax policy were introduced tomorrow.
Therefore, it is necessary to wait until the real estate market bottom is more solid before taking action. Five years is neither too long nor too short, and it can be gradually pursued.
Secondly, it is highly likely that the pilot will be rolled out in pilot cities first.
In addition to the current pilot cities of Shanghai and Chongqing, I believe there is another city that may be selected for the pilot:
Shenzhen.By the end of 2022, the Ministry of Finance issued the "Implementation Opinions on Supporting Shenzhen to Explore and Innovate the Fiscal Policy System and Management System," supporting Shenzhen to take the lead in national tax system reform, actively undertake major national tax reform tasks and research topics, and continue to be a pioneer and experimental field in reform.
A key issue in tax system reform is to address the local tax source issue, especially to break through the bottleneck of land finance. The real estate tax that the Ministry of Finance has been promoting aims to achieve this goal.
Hainan may also be possible.
Again, which houses will become the subject of collection?
Some views believe that if the real estate tax is to control housing prices, then a progressive collection method should be adopted, and it should be collected from the rich, without increasing the burden on ordinary people.
It should be noted that real estate tax is also a kind of tax, and the essence of taxation is the redistribution of national income by the state through political power, emphasizing the principle of fairness.
In this way, it must strive towards the goal of "promoting common prosperity and narrowing the wealth gap."
If you only have one self-occupied house, there is no need to worry too much about the real estate tax.
As for those who hold multiple properties, through progressive tax calculation, they can be forced to sell or rent out their idle properties. In the long run, it can improve the efficiency of housing utilization, increase housing supply, and curb the rise in housing prices.
Finally, will the introduction of the real estate tax cause housing prices to collapse?This might be an overworry.
Shanghai and Chongqing have implemented real estate taxes for more than ten years, and housing prices have already more than doubled. In the long run, none of the countries that have introduced real estate taxes have seen housing prices continue to fall as a result.
Ultimately, what determines housing prices is never the single effect of a certain tax, but rather monetary policy, economic conditions, and population cycles.