The effects of Shanghai's property tax could soon be felt by the city's millions of tenants with rents likely to see a jump after the holiday, analysts have warned.
Since the Spring Festival break is usually the time when landlords renegotiate deals with tenants for the new year, it's likely that rental costs will rise with owners passing on their property tax commitments to tenants, Soufun.com said in a report.
Rents will also be buoyed by increasing market demand as more people are expected to give up their plans to buy a home and rent instead, said Wan Jiuhong, a senior editor at China's biggest real estate website.
Many potential buyers will shelf their plans and choose a wait-and-see attitude in the hope that prices will come down as a result of the tax and the ban on home purchases for certain groups of people, the report said.
In a Sina.com survey, 45.8 percent of 2,542 people who responded said they would either give up or postpone their house-buying plans because of the tax while 72.6 percent said the policy would put more pressure on real buyers.
Rentals in some parts of Shanghai, however, already moved upward in January.
In Gucun in Baoshan District and Changshou in Putuo District, for instance, rents had risen by as much as 700 yuan (US$106.38) per month by the end of January, said Zhang Feng, a manager with Century 21 China Real Estate Company.
In December, the average rent for a second-hand home in Shanghai climbed to 2,825 yuan per month, a rise of 5.7 percent from a year earlier while the average cost for a three-bedroom apartment was 3,881 yuan per month, according to the Soufun report.
Rising rents and a seemingly shrinking house buying demand has aroused concern that the policies targeted at speculation may have other negative consequences.
"The property tax and purchase quota will help curb speculation and may bring down the rocketing home prices for a short time," Chen Guoqiang, director of the Real Estate Research Institute of Peking University, told Xinhua news agency. "However, the market will be twisted if these policies are in place for a long time."
The quota may suppress purchasing demand for a while, but the results are that market demand may build up during the period, and that could prove to be a key force behind a new round of price rises in the future, according to Xinhua.