The State Council requires local housing authorities to levy a 20 percent personal income tax on the trade of secondhand houses to bring down house prices. This requirement runs counter to its purpose and will not bring down housing prices in Chinese cities, says an editorial in the 21st Century Business Herald. Excerpts:

The government should make decisions according to the real conditions of the market. Today, houses in big Chinese cities are not only for residency, but they are also an important, if not the major, means of investment.

Some people have dozens of houses each, many of which are left empty. Therefore, the government should increase the costs of owning houses, but not the costs of buying and selling them. The government should make the rich pay more taxes, like the real estate tax, on their homes, forcing them to sell more houses.

But the new requirement of the State Council will not affect these people owning a large number of houses. Instead, it will increase the burden on homebuyers.

The rise in housing prices is also an important benefit of China's development and economic growth. The central authority's new requirement is actually removing that benefit from many common families.