Hong Kong stamp duty
To rein in the city's runaway housing prices, Hong Kong's Financial Secretary John Tsang Chun-wah announced an additional 15 per cent stamp duty on non-permanent-resident and corporate buyers starting from October 27, 2012. The move prompted speculation over the effectiveness of taxation on the real estate market and criticisms that Hong Kong was turning away from its roots as a free market economy in favour of a more protectionist market environment.
Hotel scheme holds high risks for buyers who saved on stamp duty
Joyce Man, Olga Wong and Paggie Leung
Buyers of units in the Apex Horizon hotel may risk financial burdens despite avoiding stamp duties by making the controversial purchase, property experts warn.
This week property giant Cheung Kong sold 360 units at the hotel in Kwai Chung, which opened in 2009. The units are classified as commercial properties so buyers escape the extra stamp duties imposed on residential property transactions last year. In October the government imposed a buyer's stamp duty of 15 per cent of the purchase price of homes, payable by all non-permanent-resident buyers and those buying houses or flats through companies, in addition to the standard stamp duty of up to 4.25 per cent.
In a copy of a provisional contract seen by the Post a clause stipulates that the buyer of an Apex Horizon unit must "make monthly contribution to the hotel-management expenses". They are also obliged to pay a monthly contribution to "hotel-operation expenses".
Investor Ip Chiu-fai, who paid more than HK$3 million for a 660 sq ft hotel unit in the Apex on Tuesday, said he was aware that ownership would incur expenses but hoped that this would be exceeded by rental returns.
"Even if the return can't be as high as HK$14,000 per month, I can hope for HK$10,000 or HK$8,000 - which will still be better than depositing my money in the bank," he said. "After all, I still own a unit I purchased at a lower-than-market price of about HK$5,000 per sq ft."
His agent had told him that he could live in the unit by paying a monthly rental of about HK$14,000, which would be refunded, in order to comply with the hotel's licensing agreement, he said. However, he has no plans to live in the unit himself.
Ip said he was not worried about the government's investigation into the scheme and the expenses he may be charged for the hotel's operation.
"I knew I would need to pay for expenses, otherwise the units would not be as cheap as around HK$5,000 per sq ft [based on gross floor area]," Ip said.
Lawrence Poon Wing-cheung, a spokesman for the Hong Kong Institute of Surveyors, warned that hotel operation expenses could involve a wide range of costs, from buying chandeliers, to the salaries of cleaners and receptionists.
"The buyers may have false expectations if they think they would yield a good return. The amount could be diminished greatly after discounting all the expenses," he said.
An Estate Agents Authority spokeswoman said the authority would take action if any agents were found to have misled buyers or made false claims.
Chief Executive Leung Chun-ying said he had instructed departments to follow up on sales at Apex Horizon and would ask the developer to provide information clearing up legal and management uncertainties.
"The government attached great importance to the partial sale of the Apex … To put it simply, the buyers did not buy a flat or a divided ownership. They don't even possess the exclusive right to use," Leung said.
A Lands Department letter obtained by the Civic Party yesterday revealed that the government knew of Cheung Kong's plan to sell hotel units at Apex Horizon as early as May last year. In the letter, the department reminded the developer to alert buyers that the units could only be used for hotel purposes.
Cheung Kong has said the sale of the hotel units raised HK$1.4 billion, almost seven times the land premium it paid to the government when it applied to change the site from industrial to non-industrial use.