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A man walks past a construction site in Pudong New Area in Shanghai, January 17, 2007. [newsphoto]

The practice, in turn, has led to housing prices skyrocketing in major cities.

According to a report released recently by the website Sina.com and New Real Estate Magazine, real estate prices in Beijing have increased by 42 percent over the past three years. The average housing prices in 70 major Chinese cities climbed 5.2 percent in November year on year.

"The tax signals the government's resolve to regulate the property market," said Zhang Qi, a researcher with the Institute of Economic and Resources Management affiliated to Beijing Norman University.

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