• Thu
  • Dec 18, 2014
  • Updated: 1:40pm
NewsHong Kong
PROPERTY

Sparks fly in developers' meeting with officials over anti-speculation taxes

Private developers, angry over government's stamp duty to curb speculation, slam officials for being 'ignorant' about the sector

PUBLISHED : Saturday, 22 December, 2012, 12:00am
UPDATED : Saturday, 22 December, 2012, 3:51am

Private developers are threatening to stop redevelopment projects, claiming the government's new anti-property speculation taxes will render property acquisition unprofitable.

In strongly worded comments after a highly charged meeting with Transport and Housing Bureau officials yesterday in a bid to force the government to ease the measures, the developers expressed "extreme regret" over the new taxes and criticised the officials for being "ignorant" about how the property sector works.

"The officials did not seem to know about redevelopment," said Stewart Leung, chairman of the Real Estate Developers Association, after the meeting.

"I simply told them they were too ignorant," he said.

The association wants the new buyer's stamp duty - introduced in late October, under which overseas or corporate buyers of local properties have to pay 15 per cent of the transaction price as tax - to be dropped, or for local firms to be exempted.

They claim the tax jacks up costs for acquisition of properties for redevelopment.

But the government stood firm on the issue, saying that any exemption could create loopholes for non-locals to speculate on property through local companies.

Deputy Secretary for Transport and Housing Agnes Wong Tin-yu said the government explained details of future implementation of the buyers' stamp duty during the meeting.

She said the tax would be refunded to developers who can produce the government's consent of redevelopment within six years of completing the acquisition, adding that the government would adjust the stamp duty rates based on prevailing market conditions when necessary.

But Leung argued: "We told them it won't work and the government will have to do [redevelopment] itself. No developer would be interested in doing redevelopment any more ... [It] takes a long time and involves many companies and lengthy discussion with owners."

An association member, who declined to be named, said of the tense atmosphere at the meeting: "We were angry and kept questioning the officials what loopholes they were concerned about. I don't think we will have another meeting with the government."

Leung quoted officials as saying that they were willing to listen and asking the association to submit more views. He said the association planned to submit another paper to the government after the holidays.

Developers have been up in arms over the government's extension of anti-property speculation taxes since they were announced in late October.

In a statement last night, the Transport and Housing Bureau reiterated that the new tax was in line with the policy to place higher priority in meeting local people's housing needs.

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This article is now closed to comments

donniemcm
The government are not so ignorant, they know that those properties cartel are changing local people's life.
And they are just arguing they won't work, and who will believe this. It's just some stupid threats.
megafun
What is needed is a road map for affordable private housing. Even at $40,000 pm. it is not realistic to ask that person to pay 50% of that income to home purchase! And, given suggestions of 100% mortgages, that guy's 50% income can only afford to use $2mil for a tiny 400 sqft flat (based on $5000/sqft).Since $5000/sqft properties are not commonly available, maybe these developers ought to demand a Government policy which can produce ample supply at $5000/sqft, or much lower - say $2500/sqft.
rpasea
The 15% tax will be assessed on buyers and refunded to the developers if they achieve consent within 6 years??? What is this all about? The RDA is absolutely correct in accusing govt officials of being ignorant. The same can be said of the Buildings Department and most other govt departments staffed by overpaid bureaucrats with no knowledge of the real world.
The current system of releasing land when developers ask (the "application list") is absurd and leaves the supply of land in the hands of the developers. Let's go back to the old system of releasing land regularly (was it 50Ha per year?) starting with the Central Market site followed by the GPO site and later followed by Wanchai North where Immigration and Revenue Towers and courts are located (these can be moved to Kowloon). The market desperately needs land for office space, not speculative housing for mainlanders to launder money. The only housing shortage is at the very low end and this can be satisfed with govt rental developments.
johndoe
Real estate supply in Hong Kong is more about stock than about flow.
There are 250,000 empty residential properties held for speculative purposes in Hong Kong.
Now figure out what would happen with prices if these were to be sold.
honkiepanky
I am absolutely amazed that some people still think there is no housing shortage (except at the low end).
I strongly suspect this is a case of it being difficult to get a man to understand something, when his salary depends upon his not understanding it.
mymak
The developers have shown their true colours. Ganging up on the Government and threateneing the prosperity of the Hong Kong people.
It is the objective of any Government to improve the living standards of the population. It is the objective of private firms to maximize profits for its owners. Firms need to adapt and innovate in different economic conditions. Not have Governments adapt their policies to meet the needs of firms. The developers have in effect put the proverbial gun against the head of the people of Hong Kong. Scrap the tax and let people speculate to the detriment of the majority of Hong Kong people or we quit, they say.
Go ahead. Exit the market. Someone will take your place. A new firm or another firm will innovate and find ways to make profit in an extremely friendly (even with the tax) market. But if your bullying and hectoring succeeds then the status quo will prevail. Unaffordable housing for the majority of Hong Kong people and long -term politicial turmoil brought about by such actions. Go - good riddance to bad rubbish.
rpasea
The issue of housing costs in HK is not a matter of supply. It is a direct result of historically low interest rates as a result of the peg to the USD. There are about 250,000 vacant flats in HK at the moment. The shortage is at the low end and this is a sector the private developers do not address as it is a rental market serviced by govt housing.
Regarding your comment that other parties will step in if the existing players stop development is not realistic. This notion would work in a free market open to all players. The real estate market in HK is controlled by a cartel of which the govt is the lead player. No one other than the big players have the connections and resources to acquire sites and for any large scale project.
mcheung
According to you, there are about 250,000 vacant flats in HK, WHY?
It's because the developers/landlord are holding the flats off, thus tightening the supply, to get a better price. It's also possible the developers are building luxury flats to cater to foreigners/mainlanders to launder money. Even local, whether individual or company are trying to speculate the market. All these create housing shortage at the low end as you put it, I'd rather call this "unreasonably high cost and unaffordable housing".
megafun
I reckons if all developers leaves HK, and let others - such as NGO takes over it will be alot better for us locals.
mymak
You say the Gov't is the lead player. It is the Gov't that wants this policy. If they are the lead player then surely they can have some control of market entry barriers. Yes, it is a cartel. That is the problem here. You seem to think that you can justify not having the tax becasue there is a cartel. Cartels are not good for the ordinary consumers, whether it be in relation to a trip to the supermarket or a trip to the real estate agents.
While you are trying to argue to kill off the tax, you are actually presenting a strong case for a more radical overhaul of the entire industry in Hong Kong, starting with curbing the power of a few large developers to control the prosperity of 7 million people. Well said rpasea! The reality is that market conditions have now changed. Developers and fans of the developers need to adapt and innovate to meet the challenges of the new market conditions.

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