The team at City Weekend Home & Office were feeling a bit muddled by all the talk about the new real estate taxes. What do all these fees and regulations mean for property owners and how will they impact Shanghai’s real estate market? ChinaHouse broke it down for us and outlined 5 characteristics of the new regulations:

1) More Powerful Regulatory Mechanisms

Regulation 1: Identification and Adjustment of Growth Targets
In 2011, all local governments will need to set fixed targets regarding newly built homes to meet economic development goals and increase consumers’ purchasing power, giving them better payment terms. These targets and goals will also be transparent to the public, holding officials to greater accountability.

Regulation 7: Increased Fiscal Responsibility
The government will designate special authoritative bodies to liaise between central and local governments. The purpose of these positions is specifically to improve responsibility surrounding construction and stabilization of pricing.

Regulation 8: Increased Availability of Information
Opening news and media sources to share real estate information should improve the quality of reporting. By sharing regional results, the government hopes to stabilize housing prices and guide more reasonable demand and consumption. By allowing responsible media a voice, increased information will ensure healthier growth in the real estate market and the housing security system.

2) Tighter Loan Restrictions

Regulation 4: Increased Payments on Second Homes
Consumers looking to purchase a second home will think twice. This regulation increases the amount of a down payment and the interest rates on loans used to buy a second home.

3) Tougher Purchasing Restrictions

Regulation 6: Maximum ownership clause
One family may only own three homes.

4) Increased Supply

Regulation 2: Increased supply of indemnificatory housing

Regulation 5: Increased land supply
All regions are incentivized to increase and improve their land use. Infrastructure development targets are set at 70% of the total land supply for housing construction being use for middle class residential or commercial use.

5) Tax Increases

Regulation 3: Homeowners Tax Increases
Housing taxes will be implemented at first in experimental cities like Shanghai and Chong Qing. There will also be fines. If a homeowner sells a home that was in his possession less than five years he must pay the tax for the full amount of the sale rather than solely on the principle.

While these regulations seem like a step in the right direction, we’ll have to wait and see if they are powerful enough to stabilize China’s growth and curb inflationary pressures enough to prevent a bubble. For more information contact ChinaHouse.