With Prices Expected to Fall, Is Real Estate Tax Back On?

The real estate tax seems to fluctuate with the housing market. When it is booming, land sales are sufficient. Talk of the tax is pushed off in case it spooks the market. When real estate tumbles, the imminent need for a stable revenue source becomes apparent. No surprise then, that the two part headline from iFeng reads: Real estate tax will arrive soon! Is 2017 the year home prices finally drop? (“房地产税”快来了!2017年房价终于要跌了?)

A few days ago, the State Council promulgated the Guidance on Innovating the Government’s Way of Disposing Resources, which explicitly referred to “supporting various regions to explore and innovate on real estate tax, pension and medical security”.

In the central government, “the house is used for living, not for speculation.” To make certain real estate market advances in the direction of fighting against speculation, preventing house-flipping. The real estate tax was once considered a “weapon” for lowering home prices, the real estate tax has once again come into the people’s vision. For a time, many people began to worry, is 2017 the year the property market changes?

Whether the real estate tax can impact prices is another question, the answer to which is very likely no:

In this issue, the new Institute of Supply Economics, the first dean, chief economist Jia Kang is not Fan Gang as optimistic, Jia Kang said that if the property tax is not associated with house prices, this view is not established, From no change, will affect and guide all aspects of the main economic behavior and choice, thereby affecting prices. Jia Kang pointed out that the real estate tax and the land system, housing system, investment and financing system together to consider. It can not be said that the real estate tax this factor determines the price.

Moreover, from an economic point of view, the impact of commodity prices, there are only two fundamental factors: First, supply and demand; the second is the money supply. The so-called supply and demand, that is, a number of commodity demand and supply less, the price will rise; less demand and supply, the price will fall. The so-called money supply, that is, when printed too much money, money is not worth, which is commonly referred to as inflation, this time all the goods will be different degrees of price increases.

So, the introduction of real estate tax, is affecting the supply and demand or affect the money supply? Needless to say, certainly not the money supply, because it can affect the money supply, in fact, only the central bank’s printing press. That real estate tax really can be as people expect, can change the entire housing market supply and demand relationship? The answer is clearly not, because the new house, second – hand housing and rental three blocks constitute the overall real estate market. Rigid demand in the real estate market dominated today, due to the collection of real estate taxes may be released a little stock of real estate, really not enough to play the role of lower prices.

Tighter credit will lower prices though:

The market is expected to 2017 will continue to increase the property market regulation, the industry generally said that the future of China’s hot city of the real estate market continued to tighten the probability of events will be, by combing discovery, at present, Beijing, Guangzhou, Chongqing, Qingdao, Hangzhou, Dalian, Zhuhai, Tianjin Such as Beijing, Guangzhou, Qingdao, Dalian, Zhuhai and other cities in the first suite of interest rates fully or partially adjusted to 9 fold, of which Hangzhou part of the bank’s first suite interest rates have been raised to 95 fold, the first set of mortgage interest rates in Chongqing From 8.5 discount interest rates to the benchmark interest rate. With the future as the intensity of regulation and control, the property market will be more stringent regulation is expected this year, the property market or a sustained cooling and falling house prices.

Author: 罗臻 http://www.investinginchinesestocks.blogspot.com

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