Shares for Chinese property developers plummeted yesterday after
the government announced it would levy a land appreciation tax from
next month.
Shares of Vanke, the country's largest property developer, dropped
10 percent to 17.28 yuan (US$2.21); and Poly Real Estate, the
nation's biggest State-owned developer, slid nearly 10 per cent to
52.03 yuan (US$6.67).
The Shanghai Stock Exchange Composite Index closed at 2,778.90
points, down 42.12 points.
On the Hong Kong stock market, shares in Shanghai-based Shui On
Land Ltd and China Overseas Land both slid 5.8 percent, Shimao
Property lost 5 percent, and Greentown China dropped 7.14
percent.
"The tax changes will narrow the profit margins of developers,"
said Charles Zhang, an analyst from Colliers International Property
Services (Shanghai) Co Ltd.
In a bid to halt property developers profiteering from hoarded
land, the government will switch to using market valuations of land
to determine capital gains taxes for building projects. The tax
rate ranges from 30 to 60 percent.
The State Administration of Taxation (SAT) issued a notice on
its website on Tuesday, informing developers to settle their land
appreciation tax from February 1 onwards.
The tax was first introduced in 1993, but has never been
officially collected; and is seen as yet another measure to control
the overheated property market.
Booming housing prices have caused many developers to hoard
large pieces of land and hold off on project development, in the
hope of making larger profits from land price appreciation.
The practice, in turn, has led to housing prices skyrocketing in
major cities.
According to a report released recently by the website Sina.com
and New Real Estate Magazine, real estate prices in
Beijing have increased by 42 percent over the past three years. The
average housing prices in 70 major Chinese cities climbed 5.2
percent in November year-on-year.
"The tax signals the government's resolve to regulate the
property market," said Zhang Qi, a researcher with the Institute of
Economic and Resources Management affiliated to Beijing Norman
University.
(China Daily January 18, 2007)
