The Impact of Property Taxes on Housing Price: A Review of Literature

Property taxes can increase local fiscal revenue and adjust the allocation of resources. In China, it is adopted to control the soaring housing prices over the past decade. While property taxes have been expected as effective tools to regulate housing price, there is no concrete understanding of the influence of property taxes on housing price. In this paper, we distinguish the concept of property taxes in China from other countries, and explore the effects of property taxes on housing price and the possible mechanisms. In reviewing the Chinese literature on property taxes, we found the definitions of property taxes have been distorted and included a series of real estate related taxes from all different stages of real estate development. In most recent practices in China, especially after the adoption of property tax in Shanghai and Chongqing since 2011, property taxes specifically refer to the tax levied in the retention stage, not those in the development and transfer stages. This is more comparable to the definitions of property taxes in other countries such as the U.S. So far, estimates of the impact of property taxes on housing price has been inconsistent due to the different research perspectives, including from the perspective of local public spending, tax shifting, cost-benefit and public anticipation.