A seminal figure in the development of China’s real estate sector says it will remain the key driver of the national economy for at least the next several years.
Meng Xiaosu (孟晓苏), President of the China National Real Estate Development Corporation, said to China Real Estate Business that property has emerged as a key driving force in the Chinese economy during the twenty five years since the launch of market reforms of the sector.
“Based on overseas experience, we expect China to move towards housing and automobiles as a key consumer hotspots, driving the broader economy,” said Meng. “After having reached the same level of development [as other countries], Chinese people will also see the appearance of the ‘Chinese dream,’ and chase residential homes and automobiles.
“It’s no secret that real estate remains the key driving sector for economic growth.”
With respect to ongoing efforts by the Chinese central government to contain overheating property markets, Meng pointed to property taxes as one of the most appropriate policy measures given widespread growth in nationwide home ownership.
“Prior to housing reforms the per capita living space was 17 metres. It’s now 33 square metres, for a 100% increase,” said Meng.
“The China National Real Estate Development Corporation first proposed a real estate tax in 2003. During the five-year period from 1998, when reforms were launched, until 2003, Chinese citizens went from having no homes to becoming home owners.
“We predicted that in future the situation would arise where some people became owners of many homes, and others of fewer.
“For this reason the levying of a real estate tax suits this change.
“In the past when ordinary citizens didn’t have assets, there was no way to levy the tax. Now that they have assets it’s necessary to levy this tax, and fall in line with the tax levying methods that are in general use internationally.
“It’s not that in the past we didn’t have a real estate tax, it’s just that what was levied was mainly a real estate turnover tax. At that time we advocate the addition of an ‘holding tax,’ and a simultaneous reduction in the ‘turnover tax’ – this should be one of the directions for real estate tax reform.”
Meng also advocates the levying of property taxes upon the “small property rights houses” (小产权房) that are commonly built in breach of regulations upon the land of collectives.
“No land transaction fees have been paid for small property rights houses, and it’s not possible to tear them all down,” said Meng.
“There is little barrier to the taxation of small property rights houses, and following the payment of taxes they become legal. The tax rate can be levied a little right, for example at 2%.
“This is an important tax internationally, and can serve to covertly levy a land transfer tax each year.”