Property Tax Reform and Its Effect on Housing Price: Evidence from China

This paper reviews the forthcoming property tax reform based on the present status of housing market and real estate system in China. Most of our focus on property tax concerns the effects of property tax on housing price under the new property tax reform. To answer this question, we conduct an empirical work with a sample of 30 provinces in China from 1999 to 2008 and test the data upon its econometric models. We find that some other factors such as interest rate, public expenditure, anticipated housing price growth and risk premium of investors, as well as property tax, are testified to act upon housing price. Results from the empirical analysis are consistent with findings from the previous theoretical proposition, suggesting that negative effect of property tax on housing price is approved to exist in the form of hysteresis and interest rate has the most significant effect on housing price. In addition, the increase population seems not to give upward pressure on housing price in urban area.