End land finance to lower house prices

If local governments in China do not end their reliance on land finance, it will be very difficult to lower housing prices in the cities, says an article of Nanfang Daily. Excerpt:

One month ago, the State Council decided to levy a 20 percent income tax on the transaction of private houses. About 19 cities have announced they will implement the rules according to local conditions. Only the Beijing government vowed to implement the income tax.

Local governments' disobedience is predictable. The new tax will presumably cool down the housing market, which will certainly affect the governments' revenue.

The central government should grant more tax revenues to local governments to help them make ends meet. Otherwise it will be almost impossible to receive sincere support from local governments to keep the rapid rise in housing prices in check.

The income tax policy is fiercely opposed by home owners. The new income tax policy was announced overnight while the long-awaited property tax is still on the discussion agenda.

Property tax is much fairer as wealthy people owning many houses will pay more taxes. The new tax will unavoidably hurt the interests of mid- and low-income families and add more uncertainties to new homebuyers.

The government should reflect on why housing prices consistently rise despite several sets of macro-control policies in the past five years.