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  • Dec 22, 2014
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Hong Kong unlikely to follow Singapore in raising taxes for luxury homeowners

Too many pitfalls if Hong Kong follows Singapore and hits top 1pc, experts say

PUBLISHED : Wednesday, 27 February, 2013, 12:00am
UPDATED : Wednesday, 27 February, 2013, 1:43pm

Hong Kong is unlikely to follow Singapore's example by raising taxes for owners of the most expensive luxury homes, property and tax experts say.

The city-state's initiative is seen as being aimed less at cooling the market than at taxing the wealthy as part of efforts to reduce the income gap.

"Hong Kong's private housing market is a lot bigger than that of Singapore, and many people could be affected if the Hong Kong government follows suit," said Jennifer Wong, a tax partner at KPMG China.

A higher tax announced by Singapore's finance minister, Tharman Shanmugaratnam, in his budget speech on Monday will apply to Singapore's top 1 per cent of homeowners who live in their own properties, a total of 12,000 units.

Wong said there were more than 1.1 million private housing units in Hong Kong.

"Firstly, how do you differentiate luxury homes?" she said.

Many flats in the New Territories or in urban areas are worth more than HK$10 million. The general public could be affected, Wong said.

Even if the government defined luxury homes as those priced at HK$30 million or above, it would trigger speculation below that price level, she said.

"The introduction of what is in effect a wealth tax would run contrary to Hong Kong's position as a low-tax location," Edward Farrelly, head of research for Hong Kong, Macau and Taiwan at property consultancy CBRE, said. "Neither is it certain that such a tax would alleviate pressure in the residential market. As we have seen with the introduction of previous policy measures in Hong Kong, the market reacts very quickly to establish a new equilibrium, and the effect on pricing beyond the short-term is minimal," he said.

Singapore's government will also raise tax rates for vacant investment properties and those that are rented out.

"A tax on vacant units is one that has been mooted from time to time in Hong Kong, and it may have its merits in increasing supply," Farrelly said.

"However, caution should be exercised, as the more government intervenes in the market, the less credible is our claim to be a free-market environment."

Simon Lo Wing-fai, director of research and advisory at property consultancy Colliers International, said there were a lot of difficulties in bringing in such a tax.

The administrative cost for the government to monitor where vacant flats are located will be very high, Lo said.

William Chan, a partner at Grant Thornton Tax Services, said: "The [Hong Kong] government can do whatever it wants in an attempt to curb home prices."



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Administratively, property tax in Singapore is extremely cost-effective as it is applied to all properties, and hitherto vacant properties were entitled to a vacant properties concessionary rate. This is being removed and replaced with a tiered tax rate similar to that levied on investment properties. As real estate is a scarce resource in Singapore (as it is also in Hong Kong), keeping properties vacant long-term may be likened to hoarding.
Finally, property tax in Singapore is an asset tax, unlike in Hong Kong where the term property tax is applied to the tax on property rental income.
No modern city when comes to housing its inhabitants is more intense than the New York City. With much government intervention in residential housing markets, there are more than 175 affordable housing programs. There is even a rent control law for some type of lease. When I just got out of school in the late 70s, I lived in a rental in a Mitchell- Lama apartment in Manhattan -- a government affordable housing until I had to move out because my income exceeded the limit. Then I moved to a rental across the street that later converted to a condo. It was built and managed by an Inclusionary Housing Program of New York City. It was a new building that the developer opted to have more floor areas by setting aside apartment units for the low income group. Here there is no tax manipulation or discriminatory way in achieving affordable housing. In my view, Hong Kong government should look into NYC’s way in housing its more than 8 million inhabitants through sole government or public housings – and without daily headlines in newspaper calling for affordable housing. Stamp tax alone will not bring about any housing – affordable or not.
An asset tax in Hong Kong would discourage more people from just investing in property as it would raise holding costs. This in turn would push money to investments with higher economic benefit to the overall economy. An asset tax on property but a tax rebate on incomes is a sensible measure for income distribution whilst diversifying the tax base.
I disagree about taxes for luxury home owners but totally agree on an increase on renting revenues.
Public has obviously seen a market controlled by rich people and investors. Hence some tax on their revenue would avoid them to claim a good return on investment compared to stock market.
Also agree on the tax on vacant units. And I think it shouldn't be that difficult to put in place as people have to declare rental revenue during their tax claim and government do have property ownership listing.
What is so difficult about defining a luxury property?
The top 1% of properties in terms of price and true luxury..
As we know, the price of a property in HK certainly does not reflect the "luxury" of it.
Small, overpriced simply because of supply manipulations.
If Jennifer Wong needs to know what is luxury, then take a look at the Opus for instance.
Hongkongers should not kid themselves that their market is a free one.
As for public housing, HK need to look no further than Singapore's HDB.
The most successful public property asset enhancement scheme in the world.
Any suggestion of tax on vacant units or increase of stamp duty with the hope to curbing the property price will jeopardize HK’s position as a low-tax regime or a free-market economy. “Money should be channeled to its source.” The macro approach is to finance (destined for) building of public housing units by the revenue from land sales. If all Hongkongers see that most, if not all, the money from land sales go to public housing projects which will increase the supply of residential units and hence reduce the demand of private residential units, in the long run the problem is done!
When comes to residential property, in Hong Kong as time moving from the colonial to post colonial what we are facing is more and more warms showing up across more aspects living in Hong Kong. Different property players bear different goal which all seem to be wallowing in a gridlock of disagreements.
First, the new administration inhirated a backlog for affordable housings but find scarcity in land that which is uneconomical to develop. Second, the big developers who hold land are concentrating to build for outsiders as investment so maximizing profits can be made. Third, the individual homeowners treating their property as a retirement nest will seek opportunity to speculate on property so that all properties will improve value as time goes thus perpetuating unaffordable housing for the rest. Of course, those who are genuine house seekers are not players. They are powerless victims whose only contribution by their present is setting an alarm that the intractable gridlock has also other social implications.
I don’t expect the developers and the homeowners will change their mindset if left alone. What remains is the new administration which must serve those victims and rectify social ills. In fact, not doing so, the governance is delinquent. We don’t want to stay at the colonial time after knowing that there might be even more and more warms accumulating for everyone in Hong Kong – you will not be affected unless you are prepared to take flight when time is right. Reform.


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