Probe launched on sales in Apex hotel over stamp duty
Cheung Kong insists sales of units at hotel in Kwai Chung are not a way to avoid stamp duty
The Lands Departments is investigating whether property giant Cheung Kong has violated land lease regulations by selling units at a suite hotel.
Buyers do not have to pay stamp duties when buying commercial property.
The probe comes as the first 65 of the 360 units in the Apex Horizon hotel in Kwai Chung, which opened in 2009, were offered for sale last night, attracting more than 100 potential buyers. More will be available today.
On offer were 660-square-foot, two-bedroom units and 909-sq-ft three-bedroom units. The average selling price was HK$5,200 per square foot.
It is the latest attempt by a developer to offer options to investors wishing to avoid the growing policy risks of residential property.
"Buyers of Apex Horizon do not need to pay buyer's stamp duty or special stamp duty, as this is a commercial property," executive director Justin Chiu Kwok-hung said. Chiu insisted the sale was not aimed at circumventing the special 15 per cent duty on non-locals and businesses and up to 20 per cent duty if the properties were resold within three years - measures introduced last October to cool the market.
"It's never been our intention to sell units to home seekers," he said. "Living in a hotel unit is totally different from living in a residential flat. You have to comply with Hong Kong hotel rules."
The units are a new investment product for investors seeking an investment yield of more than 4 per cent a year.
Chiu said most potential buyers in the sales office last night were investors. They might buy units for family members to live in but they would have to sign a separate hotel lease agreement with the operator.
Apex Hotel Management, a unit of Cheung Kong, manages the hotel.
The Inland Revenue Department said it would handle the sales in line with the Stamp Duty Ordinance.
It said whether a property was residential was not related to how it was being used, how it was marketed or whether it was a home-style hotel.
A spokesman for the Lands Department would not comment as it had launched a probe into the scheme.
He said the hotel site was for non-industrial use, but the lease also specified that the site should provide no less than 21,190 square metres for hotel use.
A property consultant said buyers would not purchase units for their own use because the management costs of running a hotel were higher than those for ordinary residential properties.
According to Cheung Kong, owners must pay a monthly management fee of about HK$2.90 per sq ft, but this may change next year.
Since the government introduced the special stamp duty on residential purchases for companies and non-permanent residents at the end of October, investors have been putting their money into non-residential properties such as offices, shops, and car-parking spaces.
Apex Horizon is one of the four extended-stay hotel projects in a portfolio that Cheung Kong planned to list last year to raise up to US$800 million.
The company targeted local investors but few showed interest, according to a Hong Kong-based fund manager.
Selling the hotel business now would be better than waiting endlessly in the IPO queue, he said. The upbeat sentiment and ample liquidity in the market could help ensure a good price.