The long-awaited property tax in China finally has some updates, but it may not cause the fall in housing prices that the public expects.

Many potential homebuyers believe that the forthcoming property tax will have a strong and immediate negative impact on the real estate price.

They confidently expect that levying property tax will make holding houses much more costly, and therefore may drive housing speculators out of the market. But it may be a bit unreasonable to speculate that the property tax will reduce speculation.

Trivialized by the universal unease about rocketing house prices, the actual policy implications of property tax have been less discussed in the press.

Property tax will offer a stable source of revenue for local governments, and therefore facilitate subsequent reforms to neutralize the involvement of local governments in housing markets.

Local governments have considerable fiscal incentives to push up house prices, as land transfer fees account for a major source of their revenue. Due to the fact that this kind of government revenue is not legally classified as taxation, the local and national people's congresses cannot properly scrutinize the use of these revenues, which are not even a part of local government budgets.

Property taxes actually provide a fiscal tradeoff for local governments. They have to choose between stable and long-term tax revenue or risky and short-term land transfer fees, which are directly contingent upon house prices and we still do not know when the bubbles will burst.

How taxes will be collected is also important. Some leaks have already suggested that the tax base would be the assessed value of taxpayers' properties. While the exact tax table is still unknown, it is clear that not all the households can afford the tax, if the government sets the tax high enough to affect homebuyers' decisions.

People living in rich areas but not earning high incomes, if the tax is uniformly applied, will be substantially worse off. Hence, it seems that tax exemptions are logically necessary and inevitable. However, given the difficulty, in reality, of discerning household income and the number of houses any individual owns, any tax exemption will lead to considerable tax evasion.

Yet it is unknown how much this is going to affect tax revenue or make the taxation less fair. Collecting the tax will require further reforms, and the tax table will be adjusted in the future according to policy demands and the spectrum of housing ownership.

The Chinese housing markets are economically mysterious. After the newest tough regulations this year, major cities' house sales have dropped drastically but the prices remain quite steady.

This economic inconsistency suggests that there are other factors beyond markets contributing to the mystery. One factor is the money supply. Because housing markets channel most of the lendable funds, money-issuing plays a unique role here.

This is another link between the local government and housing markets. Not only can governments affect the costs of construction by controlling the magnitude of land transfers, they can also influence the demand by instructing State-owned banks to issue loans.

Therefore, to levy property tax fairly, politically sustainably, and consistently, policymakers have to grasp many complex issues. The monetary policy has to collaborate with tax and fiscal policy on land and housing markets, to secure the primary goal of introducing the tax without impacting on other aspects of the economy and people's well being.

Unfortunately, we still see little involvement and action in policymaking by taxpayers, and it appears that we are waiting for the outcome rather than producing it. The policy design of property tax should respect taxpayers' needs as much as the nature of the Chinese economy.