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China Developers Fall After Property Tax Reports: Shanghai Mover

Chinese developers fell by the most in a week in Shanghai trading after the People’s Daily reported that the government may raise taxes on ownership of properties.

A gauge tracking Shanghai-listed developers declined 1 percent at the close of trading. Beijing Capital Development Co. tumbled 1.7 percent to 5.27 yuan. China Vanke Co., the biggest real estate company listed on mainland exchanges, dropped 3 percent to 8.83 yuan in Shenzhen, its biggest drop since Sept. 24.

China will increase taxes for owning properties, and will quicken the legislation and reform of a property tax, Finance Minister Lou Jiwei said without elaborating in an interview with the official People’s Daily published today. The ruling Communist Party mentioned legislation of the property tax for the first time this month after trials started in Chongqing and Shanghai almost three years ago, a move that Ping An Securities Co. said was negative for developers in the long term.

“The biggest risk is the expansion in the property tax,” said Luo Yu, a Shanghai-based analyst at advisory firm CEBM Group. “With home prices at such high levels, any news about that could trigger market worries.”

The government may use a higher tax rate as the trials are expanded to other cities as early as the year end and may increase the scope of taxable properties, China Securities Journal reported, without saying where it got the information. Minister Lou also said the government will cut some levies and fees on property construction and transactions, according to the People’s Daily article.

The benchmark Shanghai Composite Index closed little changed, after a preliminary manufacturing index trailed economists’ estimates and on concerns that the government may take measures to curb home-price gains.

Three of the nation’s four major cities -- Shenzhen, Shanghai and Guangzhou -- raised minimum down-payment requirements for second-home mortgages to 70 percent from 60 percent, after new home prices jumped the most since January 2011 last month. Beijing did so in March.

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