When desperate, try populism

Everyone, it seems, hates the Hong Kong government’s new property stamp duty measures. Developers and their shareholders can’t be happy: their stock slid 4 or 5% yesterday. The spiky haired real estate agents, whose vast numbers are one of the main symptoms of the city’s real-estate disease, must be even more morose than usual if their commissions correlate at all with the share price of Midland Realty, down 14% or so.

The Big Lychee’s Anglophone economics sages come up with every objection imaginable – practical, technical, theoretical, moral and ideological. It can’t work, won’t work, shouldn’t work and maybe even mustn’t work, given the Hong Kong bureaucracy’s dismal record. (The South China Morning Post‘s are here and here, and this one’s free.)

Others are irate because they think the measures will indeed have an impact, and one they have bet big against. The humungous Hong Kong property thread on the AsiaXpat forum hosts several gung-ho real-estate bulls who are clearly incensed that the CY Leung administration is threatening the continued easy capital gains they felt were their due. One warns that the developers will want CY’s head (they have in fact hated him for years) and issues dire threats that government income from land sales and property transaction taxes will fall. Funny how people who have too many eggs in the real-estate basket can suddenly acquire a deep concern about government revenues.

The Standard finds an angry expat called William, who is angry that, having lived here since just 2009 (“Up to last week I believed I was from Hong Kong…”), he will have to stump up an extra 15% non-res stamp duty. He is being delivered from sinking his young family’s savings into the planet’s worst-value-for-money housing and should be grateful. (He calls this city ‘exciting for engineers’; a quick Google search suggests he may not be totally uninvolved with corporate white locusts Ove Arup, a construction company hurling your and my money down the toilet by building the Sir Donald Tsang Zhuhai/Macau Mega-Bridge. At least he styles himself ‘Mr’ not the ridiculous ‘Ir’. And tidy that apartment up.)

So absolutely everyone’s miffed?

Not at all. Reports on reaction in the Mainland vary. Some chatterers seem to resent yet another symbol of Hong Kong’s exceptionalism, while others are envious and wish their native Shanghai or Beijing could do something similar. (From a pan-China perspective, Hong Kong operates an extreme version of the hukou system that benefits selfish urban dwellers by binding migrant workers’ residency and welfare rights to native villages – a discriminatory method of exclusion deplored by folks like Amnesty International.)

And then there is the tiny matter of the Hong Kong people themselves. The ones I’ve talked to love the new stamp duties. It’s as if CY had walked up to them and given them a hug to let them know they weren’t forgotten. Whether it brings down prices in theory but not in practice, or in practice but not in theory, they’re happy. They mostly realize that policy options are limited; an immovable currency peg is being hit by an unstoppable flood of hot and often dirty money, making the city Asia’s second biggest recipient of offshore direct investment. What can you do? This is politics not economics (bar a dash of psychology to try to deflate a bubble to keep it what officials call ‘healthy’ – that is, keeping their personal portfolios in positive equity). So you go for something rough-and-ready, something populist, something that pisses off all the right interest groups, with a hint of more to come. If the people like it, it worked.

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28 Responses to When desperate, try populism

  1. Lois Beluga says:

    It’s popcorn time again and I don’t like popcorn. I guess it will have to be red wine then.

    Love, love it, love it!

    As for the expat…just look what some Asian lovelies marry! Did Halloween start early?

    PS: After a certain income level, all money is dirty.

    PPS: All fortunes begin with a crime.


  2. PropertyDeveloper says:

    You can tell when it’s raining, as Hemlock switches from “folk” to “folks”.

    Tom Holland (and William) are right to say that the new tax is discriminatory against overseas “people”/foreigners. But what has largely escaped comment is the greater delineation of the big gun measures in reserve: capital gains tax on property, which would be a revolutionary move.

  3. Maugrim says:

    HK is a funny place, in between the whinings by expats/mainlanders/agents/speculators, a vast majority of low-paid HK workers, breath a sigh of releif that the future, their future may be a little bit sunnier after all. Just think what its like to be on $20,000 per month knowing that life involves you working long hours just to save for an over-priced dog box, thinking that there must be more to life than that.

  4. Old fart says:

    Sorry…when it was widely reported that the market had surpassed the last cycle’s “bubble” why has this come as a surprise ?

  5. Pat says:

    Great article. I bought a small flat the week before the new measures were announced. The measures were predictable and even I feel happy! Perhaps I shouldn’t.

  6. Old Timer says:

    Yes, him and his missus look really “furious” in that pic, don’t they?

  7. Bela Lugosi says:

    I’m worried about Duncan Pescod, the Permanent Secretary for Housing, on RTHK today.

    His name is an anagram of:

    Cad Con Upends

    Is he the Nemesis of the property market?

  8. Tiu Fu Fong says:

    I’m cool with discrimination.

    Great that William the goatee boy feels that he was “from Hong Kong”. Also great that he has escaped from lurking in his parent’s basement surrounded by posters of Japanese cartoons to living the weeaboo dream of marrying and impregnating a Nipponese maiden. But he’s not “from Hong Kong”. When he knows a Hong Konger’s fear of what Beijing and the Mainland hordes will do next and that there is NO ESCAPE because he’s stuck with a Hong Kong passport, not Canadian, Brit, US or otherwise, then he’s “from Hong Kong”.

    If you have an escape route, then this is not your “home” the way it is for the real locals. For Westerners with no real family ties to Hong Kong, you’re just an expat passing through – even if on a long term basis – and sucking at the teat of China’s growth in a very comfortable environment.

    Goatee boy should quit his whining, wait out his 7 years and get PR if the tax means all that much to him.

  9. stanley gibbons says:

    At least he CAPS DUNCE DON

    Duncan Pescod=

    Span Conduced
    Pans Conduced
    Snap Conduced
    Naps Conduced….
    ….Sap Cud Con Den
    Spa Cud Con End
    Spa Cud Con Den
    As Cud Con Pend

  10. Tiu Fu Fong says:

    Quote from goatee boy: “Worse, my wife and I both feel that we are no longer welcome in the city we had chosen to call our home. Is this really the case? Are we really second-class citizens?”

    Oh, the calamity of being a second class citizen as a Westerner in Hong Kong where your single income supports a wife, a kid and a tank full of fish in what doesn’t look like a rabbit hutch apartment that many locals have to live in. Oh, the humanity!

    If you have the power to choose where you live rather than being damned by accident of birth, then choose to live somewhere else.

    Ah, but the life is convenient, the pay is good, the locals overinflate the value of a white engineer and the general market value of a hairy faced weeaboo is higher than in Western markets, so I guess goatee boy is going nowhere, at least until Japan relaxes its working visa laws and he can finally buy a tatami mat house with katanas and wall scrolls on every wall. But life there is so expensive compared to Hong Kong…

  11. Cerebos says:

    What a first-rate weapon that man is.

    In other news CX seem to be upgrading as many frequent flyers as possible from economy to premium economy this week. For once they’ve done a great job. Pretty much old school business class seats, no more kidney crushing moulded backrests. Same drinks trolley of course.

  12. PropertyDeveloper says:

    TFF, I’m interested that you express your opinions in terms of passport held. Would I be reading them correctly to say that ethnic monolingual Chinese who are nth generation HKers cannot be considered locals or “at home” if they have foreign nationality?

  13. R Lloyd says:

    TTF can mock but its a big point the Government has really crossed a line there.

    Had this been all HK residents with 18 months or 2 years residency to keep out fly by nights then fair enough, but 7 years before you can buy is pretty much a big explicit FU to tax paying long term expat residents.

  14. Regislea says:

    The government does have form here – dependent spouse visa cancelled – purely racist/political and economically damaging.

  15. Stephen says:

    Picking up the thoughts of Maugrim – the local Joe in the street is going to see this as positive (as do I)

    Property Prices have always been high in my +20 years here and there are inherent reasons – Government policy (a huge topic in itself), Government collusion (with big Developers) and the Developers (behaviour) themselves.

    But there is a big new player on the scene – the get my money out of China – and this player is so large that coupled with the market that the Government and Developers have made show no sign of slowing. So something had to be done.

    But fear not all those addicted to the Property Market because so ingrained is ‘high property prices are a good thing’ that considering the opposite is something no Government will entertain.

    So prices will remain high but perhaps not quite so high.

  16. Headache says:

    Not that I’ve looked into the legalities of it, but is there anything to stop mainlanders acquiring a property in the name of a HK agent and executing other instruments to assure their de facto ownership?

    I also agree with R Lloyd, as someone who is finally about to clock up 7 years (but probably won’t stick around for 8). Not all immigrants here conform to TFF’s stereotype (though a fair few do).

  17. Chimp says:

    Yes, but ultimately the effect of this measure has to be temporary. There would seem to be a lot of ways around this, surely?

    Hong Kong’s property market will remain distorted while the US plays funny money games.

    The actual mechanism could be regarded as discriminatory, I suppose, but it’s consistent with the way that most countries distinguish between residents and non-residents (US green cards, anyone?). Not really news, in that sense.

  18. PropertyDeveloper says:

    What I find objectionable is treating, say, dual nationals as 2nd class citizens, if only as it seems to echo 20th-century European history.

  19. dopey says:

    To paraphrase Hemlock: those who don’t hold property in HK wish they could go back to 2003 and buy it all. Unfortunately, I was not in the position to buy then, and now that I am, find the prices frightful.

    My current wish is that in the not too distant future I can enjoy my favorite vice: schadenfreude.

  20. Joe Blow says:

    If Honkies are free to speculate in the property markets of S’bore, Australia, Hongcouver, Toronto, London and NYC -as they have been doing for decades, and with gusto- then why can’t foreigners speculate in Hong Kong ?

    Can somebody explain THAT to me ?

  21. Jonathan Stanley says:

    @Joe Blow: Last time I checked, HK had 6~ish million people in the run up to handover, squished into a bit of land that would fit inside the UK’s M25. Between 1987 and 1997, about 10% went abroad to N. America, Australia, New Zealand and the UK. Aggregate huge tracts of land with north of 300 million people. Mainland China has 1 million US$ millionaires. Even just a small number of them piling into Hong Kong, really makes things out of whack, considering HK’s lack of physical size. Not helped one iota that the HK$ is “dirt cheap”, complete with no-thanks-to-the-US-FED rock bottom interest rates, vis-a-vis the RMB, ever since Zhongnanhai started their “dirty float”.

  22. Tiu Fu Fong says:

    PropertyDeveloper – passport is the easiest reference point. I think it comes down to whether getting out of hk when it all falls apart is an inconvenience or life destroying. For Cantonese residents with foreign passports who can flee without ending up in poverty, they don’t face the risk that other Chinese residents do. They aren’t “all in”.

    Anything less sits on the spectrum towards passing through. Ex pats benefiting from low 15% taxes and white man premium are definitely much closer to passing through, including those who’ve gone as long as getting PR.

  23. r lloyd says:


    Good point that passport is an easy refernce point but it ISNT the reference point, the refence point is PR and the intention is to stop foreign speculators.

    there is a disconect between a foreign speculator looking to make money off hong kong property and a non PR resident looking to avoid buying some PR a flat for 7 years instead of investing in their own family.

    I own my place and bought a long time ago and I’m PR but still this leaves me feeling that I’m not secure here anymore.

    Maybee thats the plan but if it is then its the end of HK as an international city.

  24. EDB says:

    @ Joe Blow: that’s exactly what I was thinking.

    Imagine the whining and gnashing of teeth if the Australian and Canadian governments took similar measures to curb speculation by Honkies in their property markets

  25. Tiu Fu Fong says:

    People are always claiming some new proposal is the end of HK as an international city. It hasn’t happened yet. It’s just the sun setting a little more. There is still plenty of daylight left and I doubt we’ll see squealing ex-pats running for the airport.

  26. stanley gibbons says:

    @EDB and Joe Blow: In Australia, non-residents can only buy brand new residential, which has been approved by the FIRB

  27. Tiu Fu Fong says:

    Stanley Gibbons – Not quite true. Australian passport holding non-residents can buy property without FIRB approval.

  28. stanley gibbons says:

    @ TFF

    Noted, but as a non-Australian you can only acquire an ozzie passport normally by 2 years residency within a 4 year period as a migrant, and becoming a citizen, it’s hardly a free to all residential market, is it?

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