SHANGHAI (Reuters] – The Chinese parliament’s top decision-making authority said that on Saturday, it would introduce a pilot tax on real estate in some areas.

Xinhua said that the State Council or Cabinet will decide which regions are involved as well as other details.

Since President Xi Jinping supported what experts call one of the largest changes in China’s real-estate policies, it has been gaining momentum.

Taxes could be used to cool the red hot home prices, which have increased more than 2000% in the past 20 years since privatisation. This has created an affordability crisis and has caused a housing bubble.

However, talk about the plan arrives at a delicate time. China’s housing market is experiencing significant stress. Home prices have begun to fall in several cities.

The tax applies to both residential and nonresidential properties, as well as to land and property owners. However, it does not apply legally-owned rural land, or to residences built thereon, Xinhua stated.

After the State Council issues the details, the pilot programs will be in effect for five years.

In 2003, the idea for a home owner levy was first presented. However, it has not taken off because of concerns about property demand and home price increases.

There has been resistance from local government officials, as well as stakeholders who worry that it will cause property prices to plummet or trigger an auction.

According to the central bank, more than 90% of households have at least one house.

However, analysts believe that the tax will generate much-needed revenues.

Capital Economics stated in a Friday note that land sales were no longer a viable source of revenue for the government. “Gradual implementation should reduce fears that a tax might cause prices to crash,” Capital Economics stated.

The megacities Shanghai, Chongqing and Chongqing introduced pilot programs in 2011. They taxed homeowners with rates of 0.4% to 1.2% for higher-end properties.

But, pilot programs haven’t been extended to other cities.

Analysts anticipate that the pilot would include regions more prosperous and diverse in Eastern and Southern China like Zhejiang, Guangdong and Guangdong.

Yan Yuejin from Shanghai-based Ehouse China Research and Development Institution stated, “It’s likely that Zhejiang would be included in reform, particularly Hangzhou.”

Hangzhou: The base for the giant of ecommerce Alibaba China’s eighth richest city (NYSE:), has an annual economic output exceeding 1.61 trillion yuan ($252billion). This represents about 70% Hong Kong’s gross national product.

($1 = 6.3839 renminbi)

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

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