China, Hing Kong markets hit on home sales tax hike

The Shangai Composite index is tumbling on Monday following the issuance of stricter property rules in China, in what seems a last-ditch effort to combat speculation on housing prices.

The new set of rules, which will see home owners selling properties levied an income tax from 1-2% to now 20%, or put it differently, a 1,000% to 2,000% increase. The move comes ahead of the annual session of the National People's Congress.

Mainland China's equity market and neighbor Hong Kong stocks both were hit by this developing story, with property developers being dragged down, with some companies hammered as much as 10% limit losses per day.

As reported by Chinese newspaper Xinhua: "Zhang Xu, a market researcher with HomeLink, a leading property broker firm, said the policies will beef up tax and loan measures and make potential buyers to reconsider their purchase decisions. Zhang said the tax hike will increase the cost of second-hand home transactions and hit speculative purchases in the property market."