Property tax to curb speculation

Speculating in property means buying in the hope of a rise in price for the original purchase. And that means speculators do not actually live in what the units they buy, leaving many of these homes empty as they wait to make a bigger profit.

Many blame this pratice for a the growing bubble in the real estate sector. Amongst the many ways to take the air out of this bubble is a tax on property.

Property tax is a tax imposed on land and property with the amount rising as property prices increase.

Zhong Wei, professor of Beijing Normal University, said, "A property tax will mean land and property no longer keep their value. If you leave your property empty, then there is a cost imposed on you. Take a one percent property tax for example. If you buy an apartment with 50 to 70 years' of property rights, you will ultimately lose about 40 percent of the value. The longer you keep it empty, the more tax you need to pay."

Li Xiaoning, president of BJ Horse Real Estate Consulting, said, "An ordinary two bedroom apartment in Beijing is worth about 2 million yuan. With a one percent property tax, the owner needs to pay 20 thousand yuan each year. Along with the management fee and heating costs, that can add up to a large amount."

Industry insiders say, once rising property prices cannot outweigh the depreciation caused by the property tax, the risk of investing greatly increases. In countries which impose such a tax, very few people buy more property than they need.

Zhong Wei, professor of Beijing Normal University, said, "Fundamentally speaking, there are two ways to solve the problem of empty houses: one is to allocate income more reasonably, and starting to impose a property tax as soon as possible."

Xiao Yong, CEO of Funlong.com, said, "This tax increases the cost for speculators, then speculation is reduced. Therefore property prices are affected, and the price of land is more reasonable."

Most countries with a market economy impose a property tax, and the amount is decided by housing prices.