CHINA may soon launch a trial property tax in Shanghai and Chongqing, amid the latest efforts to rein in property prices.

The Ministry of Finance has agreed in principle to the property tax levy in the two cities. The tax is designed to help enact the government's pledge of providing affordable housing.

China's real estate market remains overheated, even after a number of tightening measures last year, including purchasing restrictions, higher down payments and higher lending rates for buyers of second homes.

Chongqing Mayor Huang Qifan said in a report to the local legislature that the city would impose a property tax on high-end housing. A detailed regulation is being drafted and is likely to be enacted in the first quarter, sources said.

Chongqing will likely tax all villas as well as apartments with a floor area of more than 144 square meters and priced at 2 to 2.5 times the average price.

The tax will also target owners who have more than one home and have a total floor area of more than 200 square meters, the sources said, adding that the tax rate may be at 0.5 to 1.5 percent.

Shanghai, however, may tax only new homes in the first quarter, the Shanghai Securities News reported yesterday.

Yang Hongxu, an analyst at Shanghai-based E-house China Research and Development Institute, said Shanghai may tax families who have a floor area of more than 200 square meters or 70 square meters per person. The tax rate is likely to be about 0.5 percent.

The property tax will mainly have a psychological impact and curb speculative demand in the short term, said Yang. But in the long term, the effect will be limited given the low tax rate, he said.

A survey by news portal Sina.com.cn showed that 35.7 percent of respondents believed the tax would curb home prices. But 30.6 percent said average citizens will find it more difficult to buy homes with the rise in costs and another 30.6 said the tax will increase prices with costs being transferred to home buyers.

Local governments have been widely blamed for repeated failures in cooling the property market as a large portion of their revenues come from land sales.

With the property tax becoming a source of revenue, local governments may be more willing to rein in rising housing prices.

Soaring prices are a major concern for urban families with increasingly more finding homes unaffordable. Prices in major cities such as Beijing and Shanghai have more than doubled over the past two years.