China property stocks soared on Thursday after the Ministry of Finance said a property tax trial won’t be expanded this year.
Hong Kong’s Hang Seng Mainland Properties Index surged almost 18%, helping propel the benchmark Hang Seng index’s 7% rise. Hong Kong-listed shares of Sunac soared 59% and those of CIFI Holdings jumped 32.9%. Country Garden Holdings went up 28.4%, and Evergrande rose 17.8%.
On China’s A share market, Shenzhen-listed Yango Group rose more than 10%, despite defaulting on a 600 million yuan ($94.62 million) onshore bond. China Vanke Co Ltd. in Shenzhen rose 7.5% while Shanghai-listed Greenland Holdings rose 3.9%.
The conditions are not right for China to expand a property tax trial this year, state-run Xinhua news agency quoted the finance ministry as saying on Wednesday, suggesting authorities don’t want to risk further damaging confidence in the sector.
Property Slump
The Hang Seng Mainland Properties index has slumped almost 41% over the past year as Beijing’s deleveraging campaign triggered a liquidity crisis at some major property developers, resulting in bond defaults and projects being shelved or left unfinished.
Overall demand for property remains sluggish, though a slew of measures have been put in place to revive buying interest. New home prices stalled in February after edging up a month earlier, official data on Wednesday showed.
China has mulled introducing a property tax for almost a decade, and the policy mantra recently is that “houses are for living in, not for speculation.” But so far, most cities only levy property tax on transactions. An annual tax on homeownership would provide a sustainable source of revenue for local governments, and one more measure to curb property speculation.
China launched a property tax pilot in Shanghai and Chongqing in 2011 but the idea of rolling out a new trial has been resisted by stakeholders.
The implementation of a property tax faces challenges, including macroeconomic pressures and downward pressure on the real estate market, said Yan Yuejin, research director of Shanghai-based E-House China Research and Development.
- By Iris Hong, Reuters
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