• Sun
  • Nov 23, 2014
  • Updated: 5:33pm
Mr. Shangkong
PUBLISHED : Monday, 29 October, 2012, 4:36pm
UPDATED : Tuesday, 30 October, 2012, 10:06am

New Hong Kong property tax, a sign of increasing protectionism

The new stamp duty policy for non-local home buyers in Hong Kong is more than a new property rule as it puts the government on the fast track to greater regulation

BIO

George Chen is the financial editor and columnist at the South China Morning Post. George has covered China's financial industry and economic reforms since 2002. George is the author of Foreign Banks in China. He muses about the interplay between Shanghai and Hong Kong in Mr. Shangkong columns every Monday in print and online. Follow George on Twitter: @george_chen
 

The new stamp duty policy announced last Friday for non-local home buyers in Hong Kong is more than a new property rule as it puts the government on the fast track to greater regulation in a city that has been ranked as the world’s freest economy by the Heritage Foundation for 18 consecutive years.

After the city’s first-ever minimum wage rule was introduced in late 2010, some international media outlets suggested that it heralded the end of Hong Kong’s truly market-oriented economy, which had underpinned the city’s reputation for supporting a business-friendly environment for decades.

With the introduction of the additional 15 per cent stamp duty for non-Hong Kong permanent residents and corporate buyers, the city is now being accused by critics of protectionism, a long-time problem in some mainland cities and provinces. Hong Kong’s new property rules were described by Peter Thal Larsen, an influential Reuters Breakingviews columnist, as an “anti-foreigner property tax”.

Some industry watchers claim property curbs will build a “politically correct” Hong Kong under the leadership of its new pro-Beijing chief executive Leung Chun-ying.

In the fight against rising property prices, Hong Kong is definitely not alone. Many large mainland cities such as Shanghai and Beijing have policies to limit non-local home buyers, as governments vie to placate locals and maintain social stability. But, so far, none have introduced an additional 15 per cent buyer’s stamp duty.

So why did the government of Hong Kong do it? Hong Kong’s development minister Paul Chan Mo-po is said to be a big fan of Singapore, at least in terms of the city-state’s property policy.

“The backlash will be very limited, because buyers on the mainland would know that Singapore and other places impose restrictions on foreign property buyers too,” said Chan, one of the least popular officials in the current administration, according to recent polls.

Indeed, in Singapore, non-resident and corporate buyers pay 10 per cent of a home’s value in additional buyer stamp duty – five percentage points less than in Hong Kong. However, Singapore is better known for its public housing and many other social benefits than Hong Kong. So, perhaps Chan and his boss, chief executive Leung, can also try to see what else the Singaporean government has done to improve the quality of life of its citizens?

I understand the Hong Kong government may wish to help make housing more affordable to locals as quickly and easily as possible, but to some extent, this latest policy is an unfair one to many non-permanent resident, who are also the city's taxpayers.

Hong Kong’s secretary for financial services and the Treasury Chan Ka-keung told the press that the government is considering the introduction of other new property taxes, including capital gains tax. Capital gains tax? How will Hong Kong appear to the global financial community if that happens?

Hong Kong’s economic freedom score is 89.9, making its economy the freest again in the 2012 Index of Economic Freedom, according to the Heritage Foundation.

“The high-quality legal framework, which provides effective protection of property rights and strong support for the rule of law, continues to be the cornerstone of strength for the dynamic city economy,” said the foundation on its website.

I am not a lawyer; however, the government’s new tax rules (and there may be more to come, as Chan Ka-keung suggested) may affect the people’s right to hold, buy or sell properties freely in the long run.

 

George Chen is the financial services editor at the South China Morning Post. The opinions expressed in the column Mr. Shangkong are all his own. Follow him on twitter.com/george_chen or weibo.com/georgeschen

Disclaimer: The author is a property owner in Hong Kong and Shanghai. The author doesn’t own stocks of any listed property companies.

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This article is now closed to comments

SpeakFreely
George pls use some common sense. If your are foreign investor mainly doing biz in HK, not speculating houses, you would like to see a lower cost of doing biz so why would you as a foreign investor against anything that can control the ever going up price? Minimum wages were implemented in America and Europe, so what's the problem of being considered protectionism?
Regarding we ranked as freest economy it is all BS and academic as they measure how many days to start a biz or set up electricity. But they never measures how Hk government manipulate the land to create big revenue and push put foreign investors. Only kids believe we are free economy. I wrote in other place in USA I can get a building permit to expand my house in 30 days but not in HK. In USA I can buy a house without being there just by fax but not in HK....common u need to live outside Hk and Sh to understand how the work works....
dynamco
what a ****-poor unresearched article.
****legacy.library.ucsf.edu/tid/vqh25h00;jsessionid=02D944ED99940A8B10A0AD6BA3026B95.tobacco03
****www.sourcewatch.org/index.php?title=Heritage_Foundation
****www.guardian.co.uk/environment/2006/sep/19/ethicalliving.g2
so some 'paid-for-opinion' think tank deems HK the free-est economy - who paid for that opinion ?
Why is it that our local political parties are not forced (as is the norm overseas) to publish their political party donors (aka who pulls their puppet strings ?)
Our political parties are supposed to represent the people not their puppet masters.
Hong Kong has been the world's money laundry for years - time it came to an end.
Well done HK Govt. Now release more land and get the ludicrous prices down and charge owners holding 1/4 million empty black money apartments and houses at a suitably high rate to make them move.
The Liberals and twenty-dollar-Cheung **** about paying lowly paid staff a tiny ridiculous wage whilst the property barons are the real cause of business failures and overheads here.
SpeakFreely
Hk was ranked the best place to live too recently so who do you think is paying for this dump opinion think tank? They ignore cage home, pollution, avg family living in 500. Sq ft., little arts comparing to NY and London, no international sport team like soccer or NBA alike, no F1 racing, no high end art performance like boardway, no car racing track for cars, can not even find a decent restaurant by the water, only few 18 holes golf, terrible beaches, etc etc. but HK still ranked the best place to live. So national education is not really brain washing comparing to this commercial....
superdx
Hong Kong's free economy is widely reported on paper. In reality, the free economy has given rise to enormous family businesses and companies that have a virtual monopoly in markets such as property, utilities and telecommunications.
Regulation is not protectionism. You are making a correlation that is simply unfounded.
Regulation allows for a level playing field. HK residents are competing with China's top 1% wealthy for real-estate, and that is not a level playing field. Housing by definition is for people to live in, and not for speculation. Speculative real-estate is damaging no matter what nationality or country you are living in.
SpeakFreely
Absolutely HK is over rated in terms of freest economy as government since British time was using high price land policy to interfere the economy and the wealth distribution. Remember Carrefour forced out of HK? All this concept of "free economy" was used an excuse by some privileged groups like developers to rip off HK people that's why we have over 20k families living in 30 sq ft subdivided flats in industrial bldg and got evicted. See SCMP news today. Shame on HK being a free economy and having these people live a slave for the sack of being named by outsiders as a free economy? Forget it...
 
 
 
 
 

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