Boost land supply to rein in the red-hot property market
Piecemeal measures to plug loopholes that allow some to circumvent punitive stamp duties is not the long-term answer
Having sought to plug a loophole that enabled buyers of multiple properties evade punitive stamp duty, the government appears to be facing yet another problem. This follows the suggestion that some people are dodging the 15 per cent levy by getting others to pose as first-time homebuyers for them. The exact number of such cases remains unknown, but officials vowed to crack down on any abuse.
Financial Secretary Paul Chan Mo-po is to be commended for his tough stance. He warned that it was a criminal offence for homebuyers to make a false declaration. The real buyer is also liable to pay up to 10 times the levy if such cases come to light. The Inland Revenue Department and the Financial Services and Treasury Bureau had been told to prosecute if breaches were found, he said.
This is not the first time that steps taken by the government to rein in the red-hot property market have been met with countermeasures by buyers. Officials were forced to tackle a loophole in mid-April, after it was found that first-time homebuyers of multiple units had circumvented the 15 per cent duty by bundling the purchases into a single transaction.
The latest suggestion is that some “middleman” will line up a third party without home ownership to buy on behalf of the actual purchaser. A trust is then entered into with the fake buyer to ensure the legal rights of the purchaser are not compromised. Last month, when asked if this was indeed the case, housing chief Anthony Cheung Bing-leung only said those who did so would face legal risks. Chan also did not mention how prevalent the problem was. But his instructions to the tax authorities show that the issue is being handled seriously.
The finance chief is adamant that the extra stamp duty introduced in November has proved to be effective. While the number of cases of those paying punitive stamp duties may be smaller as a result, the reality is that property prices are still way too high for most would-be homeowners. The government should boost land supply to ensure adequate housing availability in the medium and longer term.