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On October 23, the Standing Committee of the National People’s Congress authorized the State Council to carry out a pilot real estate tax reform in some areas. When the news came out, it caused concern from all walks of life. Real estate tax reform not only affects the future development of the real estate industry, but is also closely related to the lives of ordinary people.
In many articles on the interpretation of real estate tax, a considerable number of views tend to be: once the levy is launched, the original operating mode of the real estate industry will be subverted, and its impact will be huge and far-reaching. The performance of the stock market also seems to confirm this. The real estate sector of A-shares and Hong Kong stocks all fell continuously after the news.
For the above viewpoints, the author has a different view. In my opinion, at this stage, the real estate tax is mainly an expected adjustment tool, and its impact on the market will be gradual rather than disruptive.
The basis of the judgment comes from how we understand the goals of the macro real estate policy and the current actual situation of the real estate market.
First of all, the main goal of our real estate policy is to maintain market stability. The various control policies we have seen so far actually serve this goal. And this is mainly determined by the huge scale of the real estate industry-this objective fact.
As shown by the following data: in 2020, the national commercial housing sales will reach 17.4 trillion yuan, and the real estate development investment will be 14 trillion yuan. The newly started area of houses was 2.24 billion square meters, and the construction area was 9.27 billion square meters. In 2020, the land purchase fee of real estate enterprises is 4.4 trillion yuan, the local government land transfer fee is 8 trillion yuan, and the local government’s fiscal revenue at this level is 10 trillion yuan.
Not only is the scale of real estate far surpassing other industries, but also there are many upstream and downstream related industries. Therefore, once a huge decline occurs, no other industry can make up for the gap in economic growth. When communicating with macro analysts of some research institutions, the author often hears such a point of view, “To predict the performance of China’s economy depends mainly on the performance of real estate.” The importance of real estate is evident.
In connection with the tightening of real estate policies since the second half of this year, it does not mean that the central government’s attitude towards the real estate industry has changed, but is still the result of maintaining the general direction of the stable development of real estate. For example, the two policies that have the greatest impact on the current real estate market, the “Three Red Lines of Real Estate Financing” and “Real Estate Loan Concentration Management” were formulated last year, with a clear aim to maintain the stable development of the real estate market. In the first half of this year, the national real estate growth far exceeded the normal level, and the risk of overheating in the property market became prominent. In order to maintain the stability of the market throughout the year, the property market policies have been significantly tightened in the second half of the year, especially the tightening of financing for housing companies and mortgages. According to the current situation, even if the national property market sales data fell sharply in the fourth quarter, in terms of the annual transaction volume, it can still maintain a level that is basically the same as last year.
Therefore, we still maintain our judgment on the policy direction in the annual reports of the past two years, namely:
In the current complex domestic and international environment, maintaining a stable real estate market is probably the best choice. “Stabilizing the market” is not only the policy goal for 2020, but may also be the policy goal for a long time to come. Regarding the meaning of “stability”, first- and second-tier cities mainly control housing prices, not only to prevent price increases from intensifying bubbles, but also to prevent price drops from causing market confidence to collapse. For third- and fourth-tier cities, the “stability” is mainly transaction volume.
Therefore, before finding alternative industries, the goal of the policy is still to maintain the steady development of the real estate market. In recent official statements, this goal is still maintained.
“Proactively and steadily advance the legislation and reform of real estate tax, and do a good job of pilot work. As far as the current real estate market is concerned, reasonable funding needs are being met, risks are generally controllable, and the overall situation of the healthy development of the real estate market will not change” (Xinhua News Agency) , “Ten Questions about the Chinese Economy”, October 24, 2021)
As for the role of real estate tax, the current mainstream views mainly focus on the following three points: one is to curb investment demand and prevent housing prices from rising too fast; the second is to supplement government revenue; the third is to adjust the gap between the rich and the poor to achieve common prosperity.