Property giant Cheung Kong has done nothing illegal in selling off 360 units in the Apex Horizon hotel in Kwai Chung. But the premise that someone has done nothing illegal usually signals debate and dissent, otherwise there would be no need to say it. In this case the developer has stirred up public anger and political and legal interest. The issue is the unfairness of the exemption from heavy stamp duties on buyers and quick resellers, which are aimed at cooling the red-hot market. Instead, the hotel sales are deemed commercial transactions.
More hotel rooms could go on sale in this way because of a legal loophole. In the case of the Apex Horizon, it was approved before the government specified in land leases in 2003 that hotels could be sold only as a whole. Thus, not only did Cheung Kong do nothing illegal, but the government is powerless to do anything about the inequity as things stand.
This is yet another political problem for Chief Executive Leung Chun-ying. His administration has staked its credibility on an effort to stem the flow of hot money into residential property. The market has continued to rise, even if his measures have taken some of the momentum out of it. The latest development reinforces the perception among critics that he cannot get anything done. Cheung Kong is controlled by Li Ka-shing, a strong supporter of Leung's election opponent, Henry Tang Ying-yen, and Asia's richest man, who is now perceived as having publicly challenged Leung's authority.
Hotel-room sales for investment and residential purposes are common enough overseas, which underlines a gap in Hong Kong's property market. The quick sale of two- and three-bedroom units at well under market prices nearby is evidence of a local demand. That said, Cheung Kong's move has sparked fears of speculation in tourist accommodation for residential purposes when tourism is booming.
Development minister Paul Chan Mo-po has warned buyers to beware of land-lease violations that could jeopardise possession of their units. Indeed, some law firms have declined to become involved in transactions because of potential legal risks. Hopefully, because tourist hotels are a lucrative business, Cheung Kong will not set a pattern which would tempt other hotel operators to follow suit. Meanwhile, the government needs to find a way to restore some fairness - perhaps by imposing a service levy on the sale of units of pre-2003 hotels and guesthouses.