SHANGHAI (Reuters – China’s highest decision-making body announced on Saturday it would introduce a pilot tax on real estate in some areas, according to the official Xinhua news agency.

Xinhua said that the State Council would decide which regions host the pilot tax, as well as other details.

China’s long-planned – but long-resisted – property tax gained momentum when President Xi Jinping supported what experts believe would be the biggest changes in the country’s real-estate policies in a generation.

The tax could finally bring down the red-hot housing prices in China. These have skyrocketed more than 2,000% from the time the government privatized the market in the 1990s. In a rapidly-urbanizing China, this has created an affordability crisis for many millennials.

However, the talk about the plan arrives at a delicate time. The property market is showing signs of stress while home prices are starting to fall in certain areas.

The real estate taxes will be applicable to all residential property, non-residential, and land and property owner, but not to legal owned rural properties or residences that are attached, Xinhua stated.

After the State Council issues the details of the scheme, the duration of the pilot programmes will be five years.

Although the concept of a tax on homeowners was originally proposed in 2003, it failed to gain traction due to fears that it could damage property demand, tank home prices and hurt household wealth. The idea has been met with resistance by local governments and other stakeholders, including from those who worry that it will cause market collapses or damage property values.

Pilot programmes were launched in 2011 by the megacities Shanghai and Chongqing. They tax homeowners at rates ranging from 0.4% to 1.2%.

But, pilots are not being expanded to other cities.

Mainland China’s Reliance on Land Sales (by province) https://tmsnrt.rs/3lyvluJ

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