Shanghai may introduce a long-debated property tax as early as this month, a move meant to curb real estate speculation and finally bring down rocketing prices, local media reports said.

The city has already won approval from the central government to join Shenzhen as the two trial cities enacting a property tax "in coming weeks," Eastday.com cited industry insiders as saying Wednesday.

But whether the new policy will actually make homes affordable for ordinary people is yet to be seen.

The annual real estate tax, which has stirred heated discussions about its pros and cons, is expected to be set at a rate of 0.3 to 0.4 percent of a home's market value, said Yang Hongxu, an analyst at Shanghai E-house China Research, in his microblog on Sina.com.

That rate echoes previous predictions.

At 0.4 percent, an owner of a home valued at 2.2 million yuan (US$329,000) would pay 8,800 yuan a year, the Shanghai news website portal said.

The government might also cap the number of homes a family can purchase, a restriction that's been in effect in Beijing since May 1. In the Chinese capital, a family is entitled to buy only one home "for a certain period of time."

The possibility that a property tax is coming has made repeated headlines on Chinese media recently, with several high-ranking officials saying on separate public occasions that the tax was "inevitable."

The Eastday report said officials with the Ministry of Finance and State Administration of Taxation said on Monday that the property tax would be helpful in "curbing property speculation" and would also "adjust income gaps among urban residents and redistribute society fortunes."

Xu Lin, a senior official with the National Development and Reform Commission, China's top economic planning body, added that the tax would be a steady income source for local governments.

The tax is not without controversy.

Supporters say it would bring down housing prices to a rational level and steer speculators toward investing in manufacturing instead of the housing market, according to Southern Weekly.

But others say the policy would only curb housing prices in the short term instead of fundamentally changing the industry structure, the Guangzhou-based paper said.

Besides, house owners are likely to pass the tax costs onto tenants, which would still make speculation possible and keep housing prices high, the newspaper added.

China has had a moderate property tax regulation since October 1986. It requires an annual payment of 1.2 percent of 70 to 90 percent of a property's original buying price - but it doesn't apply to homes that people buy for their own use.

Home prices in 70 major cities on the Chinese mainland rose 9.3 percent in August, extending their year-on-year gain for the 15th consecutive month, according to the National Bureau of Statistics.

(Shanghai Daily October 7, 2010)