Loosen Property Curbs？ Not so Fast

　　China’s real estate market is mired in a dilemma：The more the government tries to regulate themarket， the more prices go up. This has led toan outcry among the general public.

　　A meeting held at the end of July by the Political Bureau of the CPC CentralCommittee， the country’s top decision maker，vowed to “promote the stable and healthydevelopment of the real estate market.”This deviated from last year’s “strengthenthe regulation of the real estate market andaffordable housing construction，” triggeringmarket speculation that regulations couldbe relaxed. The possibility of any relaxation，however， is slim.

　　Any relaxation in property curbs would lead to a huge rebound in home prices.Home prices climbed markedly during thefirst half of 2013， with surging land sales andrecord-high land-transferring fees， despite tightening property curbs. How can the government let loose such a red-hot market？

　　Worse still， there are simmering risksin the property sector， which has been apillar of growth in the Chinese economy.Yu Yongding， a professor of the ChineseAcademy of Social Sciences， said China，a country with per-capita income of only$5，000， shouldn’t have invested so many resources in real estate and shouldn’t have letthe sector become an economic growth engine.After having visited many countries， Yufound the growth in China’s real estate markethas surpassed that of any other country.A medium-sized city in Japan can hardlycompete with a county in China in terms of property development. Property investment accounts for too high a proportion in totalinvestment and in GDP.

　　According to Xinhua News Agency，the average home size is only 47 square metersin Hong Kong， a city with a per-capita incomeof $20，000 to $30，000. In sharp contrast， theaverage area of an affor dable apartment is 90 square meters on the mainland.

　　In short， a severe misallocation of resources in the property sector is likely to ruinthe national economy if the situation continuesto exacerbate.

　　A long-term solution， such as a property tax， should be established to further regulatethe property sector. This can lead to a transitionfrom short-term solutions to long-termregulations.

　　Three elements should be taken into consideration when designing a property tax.First， the tax shouldn’t be seen as a sourceof regular fiscal revenue， but as a special taxto be put toward improving or maintainingthe city or community environment. Second，community planning determines the totalbudget， and the total budget determinesthe property tax rate. Overall community planning should refer to last year’s fiscalrevenue and expenditure. Government spending should depend on fiscal in comeand no fiscal deficit should be allowed. Thenext government should not shoulder theresponsibilities of the previous one. Finally，while a community committee would havethe power to levy the property tax， the wholeprocess should be subject to supervision.

　　In the end， a reform on property tax is

　　no easy task. Before the above-mentioned problems get sorted out and well-functioning policies are formulated， short-termadminis trative property curbs should not beloosened.