Theoretical And Empirical Study On The Impact Of Real Estate Related Tax On Housing Price

The urban housing system reform in China proceeded in full swing since 1990s. With the abolishment of public-owned housing and welfare-oriented housing share, the commercial housing market gradually builds up, driving the rapid expansion of real estate market. However, the prosperity covers quite a few social contradictions caused by rising housing price, such as:the shortage in indemnificatory housing supply fails to satisfy basic residential needs of the low-income groups; limited investment options lead to vigorous demand on houses for the high-income groups; high housing price and high vacancy rates go side by side. To curb the increasing housing price while promoting social equality, the government had successively implemented macro-economic policies to regulate the real estate market, but the effect was not so satisfying as they had even caused greater fluctuations. In this context, the stability and flexibility of real estate tax regulation attracts the public’s attention, the related tax reform becomes an hot issue. Accordingly, the analysis of the impact of the real estate tax on housing price, which will help the determination of related tax reform, is the core problem to be solved.Starting with the introduction of the real estate related tax system evolution in China, we first form a preliminary understanding of the real estate tax based on the analysis of its local financial income effect and housing price effect. This paper establishes a theoretical framework to study the influence of ownership real estate tax and transfer real estate tax on housing price respectively, then it uses panel data to further explore the link between the tax and the housing price empirically. The theoretical study shows that the real estate tax has a dual effect on housing prices, the final result depends on how ownership and transfer real estate tax affect market supply and demand. While the empirical study finds that the overall effect of real estate tax on housing price is positive, the ownership tax effect is stronger than the transfer ones. Meanwhile, the study indicates obvious regional differences, the ownership real estate tax plays a more important role in the East and West China and the transfer tax is more vital in the Middle. Finally, the paper proposed systematical tuning suggestions on the orientation and practices of real estate tax reform based on above study results.