China took another step that could weaken investment in its booming property sector, announcing a profit tax on real-estate developers that will likely hit both domestic and foreign companies. But analysts said the move, which hammered property stocks, might do little to reduce the soaring property prices that officials worry are causing problems for the world's fourth-biggest national economy.

Property developers' stock prices fell nearly 10% after the State Administration of Taxation said it plans to levy a tax, starting Feb. 1, of as much as 60% on the profit that builders earn from real-estate projects. While the tax bureau said the measure is meant to boost its revenue, analysts said it probably is also aimed at reducing the attractiveness of property investing by local and foreign developers alike.

The announcement spooked stock-market investors, who worry the tax will erode profit margins for China's real-estate developers. "The days for windfall profits are gone," said Theodore Justin Novak, a senior adviser at real-estate firm DTZ Debenham Tie Leung in Shanghai. Mr. Novak said the tax could push prices of new properties higher because the prospect of a smaller margin could encourage developers to try to nudge up sales prices.

The new tax, designed to absorb 30% to 60% of a developer's profit depending on the size of returns, was first introduced in late 1993 but was rarely collected. Analysts said the early regulations lacked specifics, in particular how to calculate the value a developer had added to a property. It was therefore ignored by local tax bureaus.

Now, the central tax bureau says it expects developers to pay up.

Property Prices Rose 5.4% in December

Property prices in China rose 5.4% in December from a year earlier, faster than the 5.2% rise in November, the country's economic planning agency said.

December property prices in Shenzhen rose 12.2% from a year earlier, the fastest pace among the 70 cities in the index, while those in Beijing were up 9.5%, the National Development and Reform Commission said. Property prices in Shanghai were unchanged in December compared with a year earlier, according to the index.

The prices of new residential units nationwide rose 6.3% in December from a year earlier, half a percentage point faster than in November. Prices in the secondary market were up 4.2%, one percentage point slower than the previous month.

Nonresidential property prices in December rose 4.6% from a year earlier, up 0.6 percentage points from November, the NDRC said. The government uses property prices in 70 large and medium-sized Chinese cities to gauge price changes.

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