CHINA’S move to set up a nationwide real estate registration system lays the groundwork for a property tax, though the levy is unlikely to be introduced any time soon given the fragile housing market, analysts say.

The unified asset network, established after a decade of work, has more than 1.5 billion records nationwide and will update in real time, the state broadcaster reported on Tuesday (Apr 25), citing the Ministry of Natural Resources.

A Bloomberg Intelligence gauge of developer shares was little changed on Wednesday morning, suggesting investors aren’t overly concerned that the property tax will be expedited. Introducing the levy may threaten a nascent recovery in the housing market from a more than year-long slump that hurt growth in the world’s second-largest economy.

“The registration system lays an important foundation for a national property tax, but it’s not a good time to do that,” said Chen Wenjing, associate research director at China Index Holdings. “The home market remains a drag to the economy.”

China has been talking about imposing a nationwide tax for more than a decade but progress has been slow, and an expansion of trials was put on hold during the housing slump last year.

The government is still keen to wait until market sentiment normalises before rolling out the tax, JPMorgan Chase & Co analysts led by Karl Chan wrote in a note. Chan expects more trial cities to be added in 2024, and the earliest nationwide implementation to be in 2026.

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China’s top leadership highlighted risks the economy faces in separate meetings in the past week, after the country showed a rapid, although uneven, recovery in the first quarter. Home prices and sales have resumed rising, but unemployment remains elevated and industrial output grew slower than expected.

The information system has long been considered a stepping stone for a national levy on residential ownership, as China looks to raise revenue while controlling property prices. Speculation about the levy has heated up again after a collapse of land sales.

Lou Jiwei, a former finance minister, recommends imposing a property tax to help boost revenue, arguing that local governments don’t have many other sources of tax income to add to their current portfolio. “Property tax should be rolled out as soon as possible after the economy normalises,” he said in a March column.

A property tax trial began in Shanghai and Chongqing in 2011. In 2021 Parliament authorised the programme to be expanded to more cities before the plans were put on hold.

“Rolling out a property tax will be easier with the system,” said Yan Yuejin, research director at E-house China Research and Development Institute. “But it’s not the only purpose. The system can also help regulators better control home markets.”

The network is crucial as real estate certifications sometimes can’t be used in different cities and had varying standards between urban and rural areas, Yan said. BLOOMBERG