Guangdong province has been the first to respond to the central government's directive requiring details of how local governments will implement measures to strengthen controls on the property market.

Its stance is rather mild, however, largely echoing the wording of the policy guidelines issued by the State Council on March 1.

But as more local government clarifications are in the pipeline, there is unlikely to be a repeat of the sharp rise in second-hand property transactions that we have seen in recent weeks as people rushed to sell or buy homes to avoid being affected by the 20 percent capital gains tax prescribed in the central government guidelines.

After this month, when the details of all local government policies have been released, the market trends will become clear and these will be an important barometer for the central government, as it decides whether to adopt new and stricter measures to control property prices.

Policymakers have imposed higher down payment requirements and outright bans on multiple mortgages in some cities in a bid to stop prices from rising too quickly, but so far these have not had the desired cooling effect.

It is understandable that local governments are not very keen on property price controls as a large proportion of their fiscal revenues come from property construction and related taxes.

Even in the face of the reluctance of local governments to implement tougher controls, the central government can still resort to monetary and taxation policies to prevent property prices from rising and triggering a crisis if the bubble bursts.

The home ownership tax, which increases the costs of multiple property ownership, is seen as the most effective method of curbing speculation-driven home price rises.

It has been implemented in a limited number of cities on a trial basis and if it were widely adopted, it would likely prove a heavy blow to speculative property purchases.

Hu Cunzhi, vice-minister of land and resources, proposed on Saturday that China should impose a home ownership tax on people who own three or more properties. This is an unmistakable signal that tougher policies will be adopted if this round of policy initiatives fails to tame property prices.

(China Daily 03/27/2013 page8)