Letters | Hong Kong’s runaway property prices and land supply shortage could be tackled by adopting Germany’s tax laws

The Hong Kong government must enact laws to tax increases in land value over and above a fixed market valuation. This would discourage speculators from holding out for future capital gain

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Campaigners from green groups hold a press conference in March to urge the government to abandon the controversial Lantau reclamation project for housing, which would take years to complete, cost billions in public funds and have a serious impact on the environment. Photo: Sam Tsang

Published: 6:35am, 3 Oct 2019Updated: 6:35am, 3 Oct 2019

In Germany, local governments can set a market-based value for an undeveloped site so that any subsequent rise in the site’s value – for example, from the development of adjacent sites or if the neighbourhood gets popular – will go to the government under tax laws.

Tax revenue so raised can be used by the government for public services and to improve facilities in the community.

Germany’s property tax laws remove the incentive for investors to speculate on land prices or to hoard sites for future capital gain.

Owners of farmland and brownfield sites in the New Territories have effectively been “sitting” on these sites for decades – for the purpose of maximising capital gain; the longer the delay, the bigger the gain.

Why can’t the Hong Kong government enact similar laws, adapted to our local circumstances, to tax away all future rises in land values over and above current “market valuations” on farmland in the New Territories?

By removing incentives to hoard land or delay development by landowners for capital gain, many under-utilised sites will be released. The government can then amalgamate them into a master plan for redevelopment and infrastructure planning.