Recently, the city of Shanghai announced the extension of a trial policy on individual property taxes for personal residences for another five years, maintaining the existing low tax rates and relatively high tax-free thresholds. Against the backdrop of continued loosening of real estate policies and the substantial withdrawal of the “three red lines” regulatory mechanism, this decision has garnered significant attention from the market. Analysts believe that the policy signal released by this measure is far more complex than the tax revenue implications of property taxes themselves.
On January 29, the Shanghai Municipal Finance Bureau, the Shanghai Municipal Taxation Bureau of the State Administration of Taxation, and the Shanghai Housing Management Bureau issued a notice stating that the “Notice on Several Issues Regarding the Pilot Property Taxation on Certain Personal Residences in the City” should continue to be implemented, with the validity period extended until January 27, 2031.
The notice specifies the execution path and specific tax administration matters related to the pilot property tax on personal residences, including the calculation of the number and area of residential units for households, the determination of taxable housing prices, calculation of the taxable amount, tax declaration and payment period, and handling of relevant information changes, among ten aspects.
Shanghai has been piloting property taxes since 2011, totaling 15 years so far. The latest notice indicating another five-year extension without significant adjustments to the policy content has sparked interpretations and discussions within the industry.
In his recent in-depth analysis, financial blogger Tom pointed out that from the perspective of ordinary residents, the property tax in Shanghai appears more symbolic than a substantive tax system. The tax-free area per capita of 60 square meters, coupled with the low tax rate designed for additional second homes, limits the actual impact of this tax type on the vast majority of households.
He believes that the extension of this policy is not the main focus; the key lies in the timing of its introduction.
Recently, the regulatory authorities in China no longer require real estate companies to report the “three red lines” indicators monthly.
The “three red lines” first entered the public’s view in August 2020. That month, the Ministry of Housing and Urban-Rural Development and the central bank convened a symposium with key real estate companies, where the official notification mentioned the “Rules for Monitoring Funds and Financing Management of Key Real Estate Enterprises” for the first time.
A high-level executive of a real estate company told The Paper that they have not been reporting since the second half of last year. Another real estate executive from Fujian province stated that they have not been reporting for a long time. Similarly, a real estate company headquartered in Shanghai also said they have stopped reporting since last year.
Tom indicated that this signifies the substantial exit of the “three red lines” as a punitive financing restriction tool from the historical stage. Over the past few years, the “three red lines” have led to a widespread credit crisis and difficulties in completing housing projects. The cancellation now aims to allow financial institutions to dare to lend to real estate companies and alleviate liquidity crises, aligning with policies such as the “project whitelist.”
He believes that against the backdrop of the ongoing downturn in the real estate market and incomplete restoration of enterprise liquidity, the official decision to extend rather than strengthen the property tax pilot is inherently a market-stabilizing and expectation-managing maneuver. By avoiding further increases in holding costs that could lead to a second hit on market confidence, the authorities intend to stabilize expectations.
Tom further pointed out that the removal of housing unit restrictions in the outer ring area of Shanghai in August last year, where properties exceeding 60 square meters per capita are still subject to property taxes, may pave the way for broader relaxation of purchase restrictions in the future. The extension of the pilot policy is a typical operation to “stabilize expectations” and reassure the market. This implies that decision-makers currently have no intention of increasing holding costs through “additional taxes” in the midst of the downward cycle, suggesting that a nationwide property tax may continue to face difficulties in the short term.
He predicted that a large-scale implementation of property taxes may not happen until around 2030. At that time, with the remaining balance of mortgage loans held by buyers who entered the market at high levels from 2016 to 2020 reduced to 30% to 40% of the original value, it could greatly mitigate financial system risks stemming from fluctuations in property prices.
Tom stated that the slow implementation of property taxes is not only due to concerns about triggering a “cut-off tide” but also because the current system’s vested interest groups are directly affected by the additional taxes.
Taking a broader perspective, the current controversy over property taxes in China can be likened to the “Tuandiru” during the reign of Emperor Yongzheng in the Qing Dynasty. In ancient China, poll taxes (labor taxes) were the financial backbone, but land consolidation led to wealth flowing to the elite, burdening the poor with taxes disproportionate to their assets. In today’s society, as the middle class’s wealth growth shifts from “wage income” to “property appreciation,” the tax system still heavily relies on personal income tax from the working class.
He said that property taxes are essentially a “wealth tax.” Just as Emperor Yongzheng faced opposition from the elite when implementing reforms, the modern-day implementation of property taxes also involves a tug-of-war with vested interest groups.
Tom pointed out that while focusing on property taxes, the quiet adjustment of the “assumed income rate” for pensions in September 2025 reveals another facet of government financial pressure.
He mentioned that pensions are not just individual savings but a redistribution of societal wealth. With the demographic dividend diminishing, pension deficits have become an unavoidable financial challenge. The downward adjustment of the assumed income rate directly affects the expected income of hundreds of thousands of retirees, marking a shift from “high welfare expectations” to “sustainable survival.”
Tom particularly highlighted the retirement dilemmas faced by the 40- to 50-year-old age group: with the gradual disappearance of real estate dividends, possible adjustments to the tax system, and declining expectations of pension income, relying solely on the public pension system has become insufficient to support a decent retirement lifestyle.