China Property Investment Update:Deny, deny, deny

There is growing concern within the Chinese property market that the government is about to introduce a property tax, albeit in stages, in an attempt to regulate prices. Of those who expect a tax, most believe that Hubei and Hunan will be the initial testing grounds; and with good reason: on 21 August, it was widely reported in the media that Hubei’s local tax authority had confirmed details of new tax trials being drafted. The next day the rumor was denied through a formal notice on the website of the local tax authority, though it was admitted that property valuation work was being conducted on second-home transactions for the purpose of eliminating loopholes in the tax code. We continue to believe property tax trials could come at any time considering the extensive groundwork being laid. We evaluate below the initial impact of such a property tax on China’s property sector.