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ISSEUS-453 The Analysis of Causes for Skyrocketing Housing Prices in China and

Corresponding Strategies

Zhenzhen Wang* , Xu Wang , Liangping Hong Huazhong University of Science and Technology

*823975701@qq.com

ABSTRACT The rapid development of China's real estate has brought many problems, especially soaring housing prices and the decline in housing's affordability. This paper gets started by summarizing existing researches on the formation mechanism of high housing prices and points out that supply & demand plays a significant role in the market pricing. Next, this paper analyzes the evolution of the regulatory policies towards housing, and indicates that their failure to inhibit the investment demand has led to the imbalance between supply and demand and skyrocketing housing prices. Then this paper analyzes causes of investment demands, and proposes that the hold of additional housing resources and the losses of public property are two main causes for housing appreciation, and thus proposes that levying residential holding tax and appreciation tax can restrain investment demands radically. Finally, this paper summarizes housing tax experiences in domestic and overseas and proposes some suggestions for China. KEYWORDSs housing prices, supply & demand, housing investment demands, housing holding tax, housing appreciation tax

1 INTRODUCTION Since the monetary and market-oriented reform of housing, the housing industry, which focuses on the construction of dwelling houses, plays a significant role in the stimulation of economic growth and the improvement in people's living standard. However, the rapid development of the real estate has also brought a series of problems, especially the soaring housing prices and the sharp decline in the affordability of houses for the moderate and low-income citizens. Currently, 66.7 % of urban residents believe that the present housing prices are" unacceptably high ". It is said that the ratios of housing prices and revenue in first-tier cities are all above 10, and the top five cities are Shenzhen, Xiamen, Hangzhou, Beijing, Shanghai, with a ratio of 15.60, 14.10,12.94,12.48,12.40 respectively. However, the international community believes that the appropriate ratio is between 6 to 8(Fig. 1). Meanwhile, it is well known that the government has enacted many policies frequently to curb housing prices and solve housing problems of low-income populations. Since the first regulatory policies towards urban housing, which is enacted in June 2003 and called as No. 121 Files, many policies has been established and some concrete measures has been taken to control the supply of land and funding, strengthen the responsibility of local governments, and improve the supply structure of housing. However, housing prices in cities are rising rapidly regardless of these policies, and the current situation occurs finally. Figure 1. Ratio of housing price and revenue

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2 THE OVERVIEW OF THE EXISTING RELATED RESEARCHES FOR THE FORMATION MECHANISM OF HIGH HOUSING PRICES According to the mechanism for pricing in the market-oriented economy, on one hand, goods are priced according to the created values in the process of production and circulation, namely, production costs ; On the other hand, prices of goods have to be valued and set during the trade in the circulation, and thus the pricing are definitely subject to the supply-demand relationship. In China, since the housing market has been formed, the mechanism for the pricing of housing has also been initially established. The followings will summarize the existing researches on the formation mechanism of high housing prices from the perspectives of production costs and supply & demand. 2.1 The Role of cost in the pricing of housing Costs include the expense spent in both production and circulation, which are relatively high for housing, including land costs, pre- construction costs, construction and installation fees, management fees, facilities fees, taxes and so on. As for production costs of housing, some scholars ( Xu 2002, Wu 2002 ) proved that high housing costs influenced housing prices significantly; Some scholars ( Kuang 2005 ) indicated that land costs, which accounted for a vital proportion of the whole costs, were affecting housing prices most; Some scholars ( Sheng & Li 2004 ) introduced the costs in the housing development in details, including construction costs, land costs, financial costs, taxes and fees, management fees, etc. ; Some scholars ( Wang 2009 ) pointed out that the profit-oriented land finance and the performance evaluation system of governments had led to high land costs and thus high housing prices. Along with the development of the housing market, land costs, building materials and labor costs are rising, which results in high construction costs. 2.2 The role of the supply-demand relationship in the pricing of housing The pricing of housing is constrained by the supply-demand relationship(Fig. 2), most scholars believe that it is the tension between the great demand and limited supply in the housing market that lead to the high housing prices.

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Figure 2. The change of equilibrium price under the influence of supply-demand In terms of supply, according to the Urban Development Report from China Association of Mayors, the total demand of land will be about 70000 square kilometers by 2050. That means the average annual demand will be about 1400 square kilometers. Such great demand will bring about the tension between supply and demand and thereby causing the rise in housing prices; Some scholars ( Zhouyu Jiang & Gao Yuan 2007 , Shen Tao 2007 ) believed that the monopoly in housing industry was the root cause for soaring prices; Some scholars (Wang 2005) indicated that, based on the research of Hong Kong, the restrictions on land supply can lead to the restrictions on housing supply and then higher prices. As for demand, some scholars ( Zhang 2009 ) showed that the growth of housing prices were demand -led rather than cost -driven; Some scholars ( Yang 2012 ) pointed out that, apart from the excessive demand for housing caused by urbanization, the prevalence of housing investment played a more significant role in the rise of housing prices; Some scholars ( Wang 2012 ) pointed out that many people regarded housing as a kind of investment good as it is relatively more accessible and higher-yielding, which led to excessive demand for housing and high prices; Some scholars ( Kuang 2010 ) indicated that, based on the research of housing stock adjustment model, expectations and speculations were two important factors which influenced the demand for housing; Some scholars ( Xu 2009 ) showed that the continuously rising per capita disposable income, the speeding up process of urbanization, and the expectation effect of housing prices had all led to growing housing demand and continuously rising housing prices. Based on the research above, it can be seen that the soaring housing prices are caused by the high production cost and the tension between supply and demand. As for the production cost, it contains labor costs and building materials costs, which are subject to the market and difficult to be lowered In a short time. However, the land cost and concerned fee, which is also extremely high and takes up 1 /3 of the total production cost, is also caused by the tension between the scarcity of land supply and the excessive demand after all. Therefore, even though the production cost is a significant factor which affect the housing prices, the supply-demand relationship is the root factor which determines the equilibrium price in the

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housing market. 3 THE ANALYSIS OF THE EVOLUTION OF REGULATORY POLICIES TOWARDS URBAN HOUSING 3.1 The evolution of regulatory policies towards urban housing Before the 1980s, the allocation of housing in China was welfare-oriented and the housing market had not been formed. From 1980 to 1998, China carried out the housing reform and managed changing the allocation system from welfare-oriented to market-oriented. In 2003, the State Council issued " Notifications on the Promotion of Sustainable and Healthy Development of the Housing Market," which defined housing as a pillar industry in the national economy. Along with the release of this document, the completed investment in housing increased by more than 30% , and the over-investment phenomenon and imbalance between supply and demand began to emerge. Since then, macroeconomic regulations and housing controls kicked off in China. Therefore, the followings will analyze the evolution of the regulatory policies towards urban housing since 2003. (1) 2003-2007, main goals: stabilize housing prices, restrain the over-investment in housing, ease the tension between supply and demand. There were growing over-investment phenomenon in many area and housing prices began to rise rapidly. Therefore, the main goal of regulatory policies towards urban housing in this period of time was to ease the imbalance between supply and demand through some proper controls. The government introduced " State Eight ", "New State Eight " in 2005, and " State Six ", "State Fifteen" in 2006. These policies were supposed to regulate the market from the perspectives of both supply and demand. The former perspective included strict controls of credit in terms of housing development, inhibition of stockpile of land and housing by enterprises, regulation of land supply for housing construction and proportions of housing types. And the latter included the raise in the down-payment rates on housing and transaction taxes and fees on second-hand housing. (2) 2008, main goals: prompt economical growth, stimulate housing investments and consumptions In 2008, just as the first round of regulation came into effect, the world financial crisis expanded and national macro policies changed. In terms of housing, the purpose of policies changed from "restrain the rapid rise in housing prices" to "prompt investments and consumptions of housing". Due to slack monetary and fiscal policies, the demand for housing were stimulated and large amounts of money flew into the housing market, which made housing turnover increase continually and the supply-demand relationship change from "supply exceeds demand" in 2008 to " demand exceeds supply" in 2009. (3) 2009-2010, main goals: restrain housing prices and investments, ease the tension between supply and demand

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With the effect of the previous round of pro-growth policies, nationwide housing prices in 2009 grew sharply, and then corresponding strategies were enacted timely and frequently: In June, China Banking Regulatory Commission reiterated that the policies and standards of the loan for the second set of housing must be executed strictly; In December, the time limits of exemption from business tax for individuals were prolonged from two years to five years by the State Council, and four policies (" State Four ") were enacted to curb soaring housing. In April 2010, the State Council issued " Notification on Curbing Soaring Housing Prices in Some Cities". These policies marked a transformation for housing policies from "pro-growth" to "curb housing prices and speculation". However, these financial and fiscal policies failed to take effects, so the central government established some more draconian policies(" New State Five ") immediately in September 2010, which stipulated housing restrictions explicitly and took effects soon. (4) Since 2011, main goals: Enact high-handed policies, inhibit housing investment and ease the tension between supply and demand The aim of policies changed from "curb soaring housing prices" to "bring housing prices back to the reasonable level". The central government issued " State Eight ", which asked local governments to enact quarterly control rules and targets, and further the differentiation of credit aids; In January, some pilot cities (Shanghai and Chongqing) began to collect housing property tax, which was, however, very low and had little effects on the housing market; In February, some cities, such as Beijing and Shanghai, issued detailed rules about "housing restriction regulation", etc.(Table 1,2) .

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Table 1. Summary of macro-control policies towards urban housing from 2003 to 2013 Contents of policy

Supply Demand 2003 Raised the investment

threshold: Projects' minimum capital ratio was raised to 30%.

Stimulated the demand for housing: Reduced the interest rates of housing loans.

2004 Controlled land supply: Raised the investment threshold.

Inhibited housing investments: Interest rates of one-year deposit and loan were raised by 0.27%

2005 Controlled land supply strictly.

Inhibited housing investments and demands: Down-payment rates of individual housing loans were raised to 30% ; mortgage rates were raised; The exemption period of housing transfer tax was adjusted to 2 years

2006 Inhibited additional land supply and increased stocked land supply.

Inhibited housing investments The exemption period of housing transfer tax was extended to 5years; Increased loan and deposit interest rates.

2007 Inhibited additional land supply.

Inhibited housing investments: Down-payment rates on second mortgages were raised to 40%; Mortgage rates were raised to 1.1 times benchmark interest rate; Benchmark interest rates of loans and deposits were raised 6 times.

2008 Inhibited additional land supply: Enlarged credit aids for housing enterprises.

Stimulated housing demand: the deed tax rate for individuals, who first purchased ordinary housing of 90 square meters and below, was decreased to 1%; Lowered mortgage rates and down-payment rates on second mortgages; Suspended the stamp duty and land value-added tax on purchases and sales of individual housing. Inhibited investment demands: The exemption period of housing transfer tax was extended to 2 years

2009 Increased the land supply.

Stimulated owner-occupied housing demand: Gave priority to loan demands for the first set of owner-occupied housing; Inhibited the investment demands; Strictly complied with relevant mortgage policies for the second set of housing.

2010 Increased the land supply.

Inhibited the investment demand: Down-payment rates on second mortgages were raised to 50%; Mortgage rates were raised to 1.1 times benchmark interest rate; Restricted loans on second mortgages.

2011 Increased the land supply.

Inhibited the investment demand: Implemented housing restriction policies nationwidly; Down-payment rates on second mortgages were raised to 60%; Housing which was sold within 5 years of purchase should be levied business tax based on the selling price; Interest rates were raised 3 times and the deposit reserve ratio was raised 7 times; Shanghai and Chongqing was set as the pilots for housing property tax.

2012 Increased the housing supply.

Stimulated owner-occupied housing demand: Mortgage rates were brought back to the level of the benchmark interest rate. Inhibited the investment demands: Reinforced the tax collection and management of stocked housing trades; Implemented commercial housing restriction policies strictly.

2013 Increased the supply of ordinary commercial housing and land.

Inhibited the investment demand: Implemented commercial housing restriction policies the diversified housing credit policies strictly.

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Table 2. Summary of macro-control policies on housing supply and demand Goals Sub-goals Control tools

Increase housing supply

Stocked housing supply

Housing property tax

Stocked land supply Disposal methods for idle land, increment tax on land value

Incremental land supply

Increase land supply

Inhibit investment demand

Short-term demand Limit credit and purchase. Reduce the exemption period of housing transfer tax.

Long-term demand Increase interest rates on deposits and loans. Levy housing property tax.

3.2 The evaluation of the effectiveness of these urban housing regulatory policies 3.2.1 Typography for references As can be seen from the analysis above, these policies stabilize housing prices by regulating the supply-demand relationship. Table 3 shows the sales area and completed area of housing, which can be regarded as the demand and supply of housing respectively. As can be seen from the table, the sales area and completed area all experienced a rise from 2002 to 2012, but the sales area increased much more than the completed area. This means that the regulatory policies had effect on both the demand and supply, but the demand was affected less than the supply, which led to the change of supply-demand ratio directly. The supply-demand ratio in 2002 was about 1.2, however, it decreased to 1.0 in 2004, which was the critical balance point between the supply and demand, and then to 0.8 in 2012, which meant that the demand had exceeded the supply(Table 3). Therefore, it can be concluded that these regulatory policies' goal of keeping the balance between supply and demand had not been achieved and demand exceeded the supply greatly instead.

Table 3. Statistics of the completed area and sales area of commercial housing from 2002 to 2012

throughout the country Comple

ted areas(billion m2) (A)

Growing rates(%)

Sales areas(billion m2) (B)

Growing rates(%)

Supply-demand ratio A/B(%)

2002 0.285 15.8 0.237 18.9 1.2 2003 0.338 18.4 0.298 25.6 1.1 2004 0.347 2.7 0.338 13.6 1.0 2005 0.437 26.0 0.496 46.6 0.9 2006 0.455 4.1 0.554 11.8 0.8 2007 0.478 5 0.691 27 0.7 2008 0.480 4.2 0.620 20.0 0.8 2009 0.577 6.2 0.862 43.9 0.7 2010 0.612 2.7 0.921 8.0 0.7 2011 0.717 13.0 0.970 3.9 0.7 2012 0.790 6.4 0.984 0.2 0.8

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3.2.2 The soar of urban housing prices in China Before 2003, commercial housing prices in China were basically stable. However, after 2003, although the government has introduced a series of policies to control housing prices, they were still soaring. In 2004, some regulation were enacted mainly to reduce housing investment scales and newly-added construction land, but these regulations resulted in deteriorating the supply-demand relationship and leading to the a sharp rise in housing prices. In 2005, China introduced new and old "national five-points package", which played a positive role in stabilizing housing prices and slowing down their growing rates. In 2006, "State Six" and "State Nine " were established to continue slowing down the growing rates of housing prices. However, this did not last for long, instead, housing prices rose rapidly again in 2007, and then it experienced a slight decline in 2008 and increased rapidly again in 2009. After that, it kept increasing with a certain rate till now(Fig. 3). Obviously, these regulatory policies' goal of stabilizing housing prices had not been achieved.

Figure 3. The Trend of National Average Housing Prices from 1998 to 2012 3.3 The analysis of the causes for regulatory policies' failure Based on the analysis above, it can be concluded that the huge demand for housing is the main factor which has pushed up housing prices. There are both consumption demand and investment demand in the housing market. The former one is a kind of rigid demand and it will increase continuously and rapidly along with the process of urbanization, but it is not the key reason for the soar of housing prices in recent years. There are scholars ( Yang Jianrong 2012 ) who have demonstrated that, based on researches on the consumption and investment decomposition model, the proportion of investment demand for housing kept decreasing before 2005 in 35 cities in China, but it began to increase since 2005 and reached 0.4 in 2008(Fig. 4). This means that the key reason for the soar of housing prices lies in the

over-investment demand, which makes the poor supply-demand relationship even worse. Figure 4. The Investment and Consumption Demand of Housing in 35 Cities in China from 1999 to 2008

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China has taken many measures to curb the investment demand, however, these policies all failed to curb such demand radically. Among these policies, the house purchase quota policy is just a short-term measure, and once being canceled the investment demand will increased sharply again; Other policies, such as the adjustment of deposit and loan interest rates, credit differentiation for housing, raising down-payment rates on second mortgages, all failed to reduce people's desires for housing investments and their affordability; The policy of decreasing the exemption period of transfer business tax on housing can inhabit investment demand by increasing the second-hand housing transaction cost. However, such transaction cost is more likely to be passed on to buyers instead of speculators, and it may also lead to the decrease in the supply of second-hand housing and then worsen the imbalance between supply and demand; Although that many pilot cities have started levying property tax now, but the tax rate is far below the expected standard and thus has limited impacts on the housing market. Therefore, China is in urgent need of exploring and introducing some effective policies to inhibit the demand for housing investment. 4 THE ANALYSIS OF THE CAUSES FOR THE HOUSING INVESTMENT DEMAND AND THE CORRESPONDING STRATEGIES Housing has dual attributes of consumption and investment, because it is not only somewhere to live in, but also a kind of Investment good and can bring speculators profits. Therefore, to study the causes for the housing investment demand, we should make it clear that why it can bring profits. 4.1 Financial attributes of housing make it a store of value and an investment Housing has financial attributes for two reasons. On one hand, it is a kind of special good as it includes both houses and land. As is known, land is a scarce resource and its supply is inelastic in the short term, which makes housing also scarce and thus act as a store of value. On the other hand, housing prices are uncertain and full of changes as they can be influenced by expectations, which bings them higher volatility and instability than ordinary goods. Meanwhile, unlike financial assets, housing is a kind of physical asset and its price fluctuations are restricted by the production and consumption, which makes its price fluctuations are always within a narrower range than financial assets and the price cannot drop without limit. In conclusion, housing has a more stable fluctuation and it can brings speculators more stable profits, so it is more popular than financial assets among speculators and regarded as a store of value. 4.2 The loss of property from the public to individuals stimulates Housing Investment Demand The profit of housing investments derives partly from the loss of public property, which is spent on urban constructions and meanwhile brings about the increase of housing value. In order to meet citizens' requires for living, work, commuting and recreation, a large amount of property is invested into lands to develop, expand, renew and reconstruct cities. This leads to

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the increase of the value of land and housing above it, as well as improves the accessibility and comfortableness of cities. For example, in the process of urban expansion, many investments should be put into the constructions in urban fringe areas, including the built of roads and municipal facilities, which makes the land in fringe areas and the housing above it appreciate in value. Therefore, such public property, which is spent on urban constructions, is partly transferred to the private owners of housing and thereby makes housing investments profitable. However, such owners do not make any additional contributions to these constructions or pay any additional fees. 4.3 The corresponding strategies: levying residential holding tax and housing appreciation tax on speculators to restrain housing investment demands radically As can be seen from the analysis above, the profits of housing investments, which results in heavy housing investment demands, stem from two aspects: One is that housing is a kind of scarce resource and thus have financial features; The other one is that the public property, which is invested in urban constructions, makes housing appreciate in value. In terms of the former aspect, speculators earn profits by reserving scarce housing resources additionally and making over-use of its financial features, which aggravates the shortage of housing supply meanwhile. Therefore, some policies should be enacted to regulate and restrict such additionally possessed housing and to weaken housing's financial features, such as levying residential holding tax. As for the latter aspect, the profits speculators get actually comes from the loss of public property. So some policies should be established to take back such part of public property from speculators, like housing appreciation tax. 5 EXPERIENCES IN DOMESTIC AND OVERSEAS IN HOUSING TAX POLICIES AND THE ENLIGHTENMENT TO CHINA To inhibit housing investment demands, speculators should be cut off from profits, which is earned by reserving scarce housing resources additionally and occupying public property. Accordingly, tax should be levied both on holdings and transactions of housing. The followings are experiences of United States, Hong Kong and France in housing tax policy, which is summarized to provide some information available for reference. 5.1 Domestic and Overseas Experiences in Housing Tax Policies 5.1.1 The USA United States The tax on holdings of housing in the United States is called the housing value tax, which is levied based on appraisal values of housing and has a rate ranging from 1% to 3%. Such tax revenue is used to develop local public infrastructures and services. Meanwhile, United States offer some special privileges to personal owners, such as a certain amount of tax deduction. The tax on transactions of housing in the United States is called housing income tax and gains tax. The housing income tax is levied based on rental incomes and the spread between buying and selling prices. There are five levels of rates, 15 %, 28 %, 31%, 36% and 39.6%, which

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are used for different taxpayers. If the tax to be paid exceeds a certain amount, the tax rate will be lowered appropriately. The housing gains tax is aimed at the increase of housing values. Local governments set different limit standards for the increase of housing values in different years, and owners need not pay any tax if the increase is within the limit. 5.1.2 Hong Kong The tax on holdings of housing in Hong Kong is called rates. Rates are levied on both occupation and use of housing, regardless that whether the house is used for self-occupation, non-occupation or rental, so ratepayers can be either owners or users of housing. Such tax revenue is used to pay for public services by governments. The taxation basis is rateable value, which is actually the market rent and estimated by Hong Kong Rating and Valuation Department. And the rates payable equals the rateable value times the tax rate.' The tax on transactions of housing in Hong Kong include the property tax and the profits tax. The property tax is aimed at personal rental income. If the housing is used for self-occupation and non-occupation, the owners can be exempted from the property tax. And if the housing is owned by companies and used for commercial purpose, the companies can also be exempted from it. The taxation basis is net assessable value, which equals 80% rental income (the rest 20% was regarded as expenditures for repair, etc.) minus payment of rates, and then payable property tax equals net assessable value times the standard rate of 15%. The profits tax is aimed at business assets rather than capital assets. So if the rental housing belongs to companies, companies should pay gains tax for the rental housing. Similarly, if the sale or transfer of housing is considered to be speculation behaviors or commercial activities, individual owners should pay profits tax with 15% tax rate and business owners with 16% tax rate. 5.1.3 France The tax on holdings of housing in France include the residential tax and the vacant residential tax. The residential tax is aimed at natural person and levied based on the estimated annual rent, and the tax rate is set by local governments. The vacant residential tax is aimed at housing which is vacant for over two years, and its taxation basis is also the estimated annual rent. The tax rate varies with the vacant time, 10% for three years, 12.5% for four years and 15% for five years. Apart from the vacant residential tax, owners should also pay 9% of the estimated annual rents additionally as the administrative fee, which is used to compensate low income groups who suffer a lot from the imbalance between supply and demand(Table 4).

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Table 4. Summary of domestic and overseas experiences in housing tax policies The United

States Hong Kong

France

Hold period Housing value tax

Rates Residential tax and vacant residential tax

Transaction period

Rent Individual income tax and corporate income tax

Property tax

Transfer Housing income tax

Profits tax

Ownership transfer tax and added value tax

5.2 The enlightenment to China To inhibit housing investment demands, speculators should be cut off from profits. China can learn from the experiences above and levy holding tax for ownerships of housing and added-value tax on transactions of housing. Specific suggestions are as follows. 5.2.1 Offer local governments appropriate tax legislative power Local governments should be given reasonable tax legislative power, because they are most familiar with local economic situations and inhabitants' tax payment capacity. According to local situations, local governments can select appropriate tax rates from a certain range, which is proset by the central government, and enact some suitable tax breaks. Collected tax can be a vital source of local governments' fiscal revenue, which can be used to provide public infrastructures and services and to prompt the development of local economy. 5.2.2 Establish a sound registration system and scientific assessment mechanism of housing Establishing a unified registration system and assessment mechanism can provide the taxation basis for governments. The assessment and collection department should be independent of each other, and the housing appraisal department should have the same power with the local taxation department and the housing regulatory department. In order to ensure the fairness of the assessment and taxation, these three departments should cooperate with each other closely and supervise each other mutually. 5.2.3 The Principles of broad tax scopes, less tax categories, and compartmentalizing the imposition Broad tax scopes means that levy taxes on all housings, in order to secure the universality and stability of the collection scope; Reduce tax categories can avoid levying taxes repeatedly and rectify the chaos of current taxes and fees collection in China; Compartmentalizing the imposition means that differentiate taxes on housing with different areas, use and values by

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taking different tax rates and setting a certain deduction measures. 5.2.4 Levy the holding tax for ownerships of housing The holding tax for ownerships of housing is levied to increase the cost of holding multiple sets of housing and thus to restrain housing investment demands. It applies mainly to the second set of housing and above, including stocked housing and incremental housing. The tax should be levied based on the evaluated value of housing, which can reflect the appreciation in housing value. This is because the original price of housing can hardly reflect its real value, such as welfare-oriented distributed housing, economically affordable housing and second-hand housing. Set different tax policies for housing with different uses, such as owner-occupied housing and investment-oriented housing. And the use of housing can be distinguished from the number of sets, housing areas and so on. Owner-occupied housing, or housing below a certain area and estimated value can be considered to be exempted from holding tax, while owners who hold several sets of housing or oversized housing can be considered to be charged with higher tax rates. In order to improve the usage rates of housing resources, empty housing should be taxed and some standards should be set for the time limits of vacancy. For example, if the continuous dwelling time of a house is less than 30 days within two years, the house should be levied the housing vacancy tax. Such taxes can compel speculators to put their excessive housing resources into the housing market and increase the supply of housing. 5.2.5 Levy added-value tax on transactions of housing The added-value tax on transactions of housing is levied to take back the loss of public property from individuals, which is originally used for urban constructions and makes housing appreciate in value in the same time. The tax should be levied based on the gap between the final transaction price and the original purchase price. Governments can set some appropriate limit standards for the added-value, and no taxes need to be paid if the increase of housing value is within this limit. In addition, some preferential policies can be enacted for owner-occupied housing, for instance, if a person signs over his housing and then buys a similar housing within a certain period of time, he can be considered to be exempt from the added-value tax.

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