‘3-D’ stamp du­ties hit the spot

China Daily (Hong Kong) - - HKCOMMENT - QIU YOU The author is a cur­rent af­fairs com­men­ta­tor.

With the in­creas­ing heat gen­er­ated by the so-called “3-D” puni­tive stamp du­ties against many prop­erty in­vestors and spec­u­la­tors, many real es­tate agents as well as prop­erty de­vel­op­ers have joined the cho­rus of con­dem­na­tion against th­ese mea­sures that have damp­ened the prop­erty mar­ket to a de­press­ing level. Apart from tak­ing to the street to de­cry th­ese puni­tive mea­sures, they have a trump card up their sleeve — threat­en­ing to block the pas­sage of the two stamp duty bills at the Leg­isla­tive Coun­cil (LegCo) in Oc­to­ber un­less the govern­ment caves in to their de­mand of ton­ing down the mea­sures.

The “3-D” stamp du­ties are namely Spe­cial Stamp Duty (SSD), Buyer’s Stamp Duty (BSD) and Dou­ble Stamp Duty (DSD). SSD, in­tro­duced in Septem­ber 2010, refers to puni­tive stamp du­ties rang­ing from 10 to 20 per­cent on properties chang­ing hands within three years of pur­chase. BSD an­nounced last Oc­to­ber, is a levy of 15 per­cent on home pur­chases by com­pa­nies and non-per­ma­nent res­i­dents. DSD is the dou­bling of stamp duty in Fe­bru­ary this year to 8.5 per­cent from the pre­vi­ous 4.25 per­cent on pur­chases of all properties val­ued at HK$2 mil­lion or above for those who are not first-time buy­ers.

Th­ese heavy doses, aimed at curb­ing spec­u­la­tion and cool­ing the red-hot mar­ket by shut­ting main­lan­ders out of it, surely hit the mark to a cer­tain ex­tent. In­deed, the com­bi­na­tion of th­ese punches has achieved the im­pact of fright­en­ing off some main­land buy­ers and in­vestors.

The of­fi­cial fig­ures showed for the first five months of this year, home pur­chases by non-lo­cal buy­ers and com­pa­nies plunged to a monthly aver­age of 249 deals from 1,089 homes brought ev­ery month from Jan­uary to Oc­to­ber last year, down from 13.6 per­cent of to­tal trans­ac­tions to 4.6 per­cent. In ad­di­tion, prop­erty trans­ac­tions in the city have dropped to a his­toric low close to dur­ing SARS in 2003 with only about 39,000 deals. Some real es­tate agen­cies have al­ready warned of staff lay­offs and shut­ting down 10 per­cent to 20 per­cent of branches. Not just es­tate agen­cies and prop­erty de­vel­op­ers, but also dec­o­ra­tion and in­te­rior de­sign com­pa­nies have been hard hit.

It is no won­der why the stake­hold­ers are all whin­ing about it with their LegCo rep­re­sen­ta­tives threat­en­ing to veto the bills on BSD and DSD and counter-of­fer­ing some wa­tered-down amend­ments. They in­clude ex­empt­ing firms owned by per­ma­nent res­i­dents from the BSD with the con­di­tions to re­strict the trans­fer of com­pany shares, ex­empt­ing cor­po­rate buy­ers from the DSD and im­pos­ing a sun­set clause to end the mea­sures in one to two years.

While I have deep sym­pa­thy for those whose liveli­hoods are greatly af­fected by th­ese dra­co­nian mea­sures, I can hardly agree that the govern­ment should with­draw the mea­sures at this mo­ment or cave in to their de­mand. More im­por­tant, it is vi­tal for those LegCo mem­bers to re­frain from al­low­ing sec­toral in­ter­est to pre­vail over the over­all in­ter­est of Hong Kong res­i­dents. Their votes should not be a po­lit­i­cal tool for them to ex­tort self-ben­e­fit at the ex­pense of the lat­ter.

If the two bills are ve­toed at LegCo or the govern­ment is forced to give in to the amend­ments which would ef­fec­tively crip­ple the mea­sures, the con­se­quence will be dis­as­trous. First of all, it sends the wrong mes­sage that the govern­ment is not de­ter­mined to cool down the prop­erty mar­ket. To do so may in turn ac­tu­ally fuel the bub­ble craze as this will in­vite an in­creas­ing in­flux of main­land buy­ers to snap up properties in the city. If the govern­ment eas­ily backs down on their de­mand, no one will be­lieve it is ca­pa­ble of sta­bi­liz­ing the roar­ing prop­erty mar­ket. In the end, spec­u­la­tors will be­come even more fe­ro­cious to pounce on the prop­erty mar­ket, jack­ing up prices and rents to an even more un­bear­able level. By then, there will be a much greater risk of a bub­ble burst and the mar­ket will be­come highly volatile.

That said, it doesn’t mean that there is no room for re­view. Af­ter all, the DSD may de­ter cor­po­rate buy­ers from ex­pand­ing their busi­ness in the city and home buy­ers who just want to change to a bet­ter house. To ef­fec­tively curb prop­erty prices and help first-time buy­ers climb up the prop­erty lad­der, the govern­ment should also con­sider pro­gres­sive prop­erty tax rates for high-end properties and those not oc­cu­pied by their own­ers. Over-de­pen­dence on the ex­ist­ing mea­sures may be counter-con­ducive to the mar­ket’s healthy de­vel­op­ment.

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