Forget war in Korea--it's a possibile real estate tax in Shanghai that's hurting stocks there today

05/25/2010 2:27 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Will Shanghai? Won’t Shanghai?

Introduce a real estate tax that is.

The Shanghai stock market rallied yesterday, May 24, on speculation—and that’s all any of this is—that the city government would put off any real estate tax for three years. Any tax on property introduced in Shanghai would be China’s first.

Today it’s back to worry that the tax is due sooner rather than later.

That fear had led to a rout in the stocks of China’s real estate developers that is a major reason for a bear market in Shanghai stocks that has sent the market down 25% from its November 2009 high.

In today’s story the Economic Observer says the city will start a property tax trial run in June. The oft-repeated prediction is that a property tax would lead to a 30% decline in housing prices in Shanghai.

No one knows what kinds of property would be subject to the tax. On May 14 the 21st Century Business Herald reported that the tax could extend to residences as well as commercial properties.

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