China considering property tax: Morgan Stanley

SHANGHAI: China may impose a tax on commercial real estate in "selective regions" before applying a levy on residences in a bid to cool the property market, according to Morgan Stanley.

The nation's developers dropped the most in two weeks on concern the government will implement a nationwide tax on the value of a property for the first time. Speculation was fueled by a Shanghai Securities News report which said China plans to expand a trial on a real-estate tax, citing an unidentified person close to the State Administration of Taxation.

China is unlikely to impose such a levy on homes this year because it would likely have an "immediate negative impact" on the property market and the authorities are targeting a "soft landing," Jerry Lou, Hong Kong-based China strategist at Morgan Stanley, said in a note.

Chinese Premier Wen Jiabao said on December 27 the government will use taxes and interest rates to "stabilise" the property market. Prices climbed in November at the quickest pace since July 2008, adding to concern that unprecedented lending and inflows of money will inflate asset bubbles in the world's fastest-growing major economy. Calls to the State Administration of Taxation's press office weren't answered.
China won't introduce a property tax this year because the government wants to keep the real-estate market stable, Hingyin Lee, Colliers CRE plc's director of research and advisory for eastern China, said at a briefing yesterday.

Morgan Stanley's Lou reiterated his "underweight" rating on property and banking stocks, saying the China property market rally will end in 2010.

By Bloomberg