Market changes call for stamp duty alternative
While we appear to be approaching a sensible equilibrium between supply and demand, the time may be right for a more suitable tax
Is now the right time to replace the Buyers Stamp Duty?
Following the inertia of the previous two administrations as regards land supply, the current administration has gone into overdrive in its attempt to catch up and remedy the situation. But I am now concerned that this may be being overdone and that we may soon face a similar situation that arose in 1997/8.
The current Buyers Stamp Duty (BSD) is only really effective in a rising market and a more equitable form of tax such as a Capital Gains Tax (CGT) now needs to be planned for and implemented as a replacement as the market corrects.
In the run-up to the handover when there was a similar escalation of property prices, in spite of a 50 hectare quota, the British & Hong Kong side of the Land Commission sought and obtained agreement to sell much more land. In the years between 1994 and 1998 around 86 hectares of residential land alone was sold, averaging over 21 hectares per annum.
As a result, private residential housing starts significantly increased with an average of over 32,000 units per annum in the period from 1998 to 2000. Compare this to the five years between 2005 and 2009 when a dismal total of 26 hectares of land was sold, barely averaging 5 hectares a year.
Predictably, the number of private residential housing starts plummeted to an average of around 10,500 per annum for the period 2007 to 2010. Only in the last year has the position started to improve with some 25 hectares of residential land having been sold in 2012/13 and over 46 hectares being brought forward in 2013/14.