Monday, August 23, 2010

More proposals to cool the property market

The latest discussion on ways to cool Hong Kong's property market has now turned to limiting foreign ownership - in particular by requiring that buyers of Hong Kong residential properties hold Hong Kong permanent ID cards. A more watered down version of the proposal would impose the restriction on smaller flats only (possibly those under some arbitrary threshold such as 800 or 1000 square feet (gross)).

While not as silly as the suggestion to impose a short term capital gains tax, this is still a bad idea:

1. it takes seven years of residence to be eligible to apply for a permanent ID card. It is unreasonable to expect people to have to wait 7+ years to buy their own home

2. the proposal is blatantly inconsistent with the governments immigration scheme based on capital investment

3. the proposal is inconsistent with Hong Kong's free market approach to regulation (as far as I am aware only entities licensed under the Broadcasting Ordinance have a foreign ownership restriction)

4. it ignores the real problem - a lack of supply of smaller and medium sized homes. Recent proposals to increase the supply of land are a better solution (but it will take time before the new supply of land translates into new homes for people to move into)

5. given that a lot of people buy their properties through companies, enforcing such a requirement would be a nightmare - given the volume of transactions a regime similar to the Broadcasting Ordinance is not a realistic proposition.

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