PLA makes John Tsang look good

Following the recent dry spell, Hong Kong has become warmer but not really hot; the air is suddenly humid, and the sky is grey and drizzling. Spring has arrived! And with it, a cascade of exciting news.

The government has introduced new stamp duties on residential property. The idea is to curb speculation by Mainlanders laundering dirty money and by others seeking a store of value in the face of global inflationary monetary policy. According to a quote in the South China Morning Post, this will kill real estate agents, and for this alone, it surely deserves our full support.

One objection is that expatriates who have not quite qualified for permanent residency here will be lumped in with Premier Wen Jiabao’s family and other folk from over the border carrying suitcases of cash. But if honest, taxpaying new arrivals decide not to buy at today’s idiotic prices, they will surely drop to their knees in thanks to Financial Secretary John Tsang when the inanity of HK$10,000 a square foot for a concrete box in Tseung Kwan O reaches its inevitable denouement.

Another objection is that the herd will now pile into industrial and commercial real estate. This raises the intriguing question of to what extent investing in Hong Kong property is a psychiatric disorder, or at least a pathological collapse of the imagination. You can put your wealth into stocks, bonds, commodities, precious metals, farmland, futures, with long and short variants, from across an entire planet. But for grim-faced masochists petrified of losing a few percent of their millions to inflation, the only possible asset is concrete boxes in one city in East Asia. The upside is outweighed by the downside, the transaction costs were onerous even before the government’s new stamp duties, the paperwork is tedious, and at the end of the day you have the burdens of ownership, like fixing leaky plumbing and collecting rent. The only attraction is cheap financing – which implies leveraging, which raises the possibility of bankruptcy. Some people deserve to be wiped out.

What will an amphibious and airborne assault by the People’s Liberation Army do to the Centa-City Index? CCTV carried a report last week that the PLA Hong Kong garrison held an exercise in which they fought a ‘Cantonese-speaking’ ‘blue’ enemy army. The full hilarity is here. The war game was itself a make-believe one performed for the benefit of the cameras. With no Cantonese-speaking nation or military force in existence, the message is clear: the PLA is prepared to crush an uprising of Hong Kong pro-independence freedom fighters.

The freedom fighters themselves denied yesterday that they were pro-independence. And, in his tellingly inverted-comma-smothered manner, even the true patriot (translated from Ta Kung Pao) must admit that…

Different from “Taiwan independence” as well as “Tibet independence” and “Xinjiang independence” on the mainland, the “Hong Kong independence” movement has remained hidden from public view.

As things that don’t exist tend to be. (You’d have thought they had enough independence – sorry, “independence” – movements to worry about as it is.)

Was the PLA anti-Canto war games story aimed at the Hong Kong audience as a warning, or at the Mainland public as a reassurance, or at some part of the Beijing power structure, maybe to counter some sort of criticism? Assuming it was aimed right here, at the uppity, flag-waving, anti-locust city-state enthusiasts, we can only wonder at the complete disconnection between Beijing and Sheung Shui. The Cantonese enemy forces are a bunch of kids who are pissed off because their city’s quality of life is being damaged by an excessive influx of visitors and a sharp rise in housing costs, and have discovered a revanchist symbolism that touches a nerve. The military, the Party-controlled media and the Beijing officials monitoring Hong Kong claim to see a genuinely separatist impulse, all the better a reason to tighten the screws on the Big Lychee – which will provoke yet more of the very behaviour and sentiment they say they want to eradicate. It would be side-splitting if it weren’t ultimately unfunny. John Tsang, in his own muddled little way trying to do something about housing, is a light in the darkness.

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16 Responses to PLA makes John Tsang look good

  1. Lois Beluga Rachman says:

    Can we have more women in uniform pics?

    The new tax on foreigners is all very well. It’s a Swiss tactic but only works in the short term. Instead of reasonably rich people buying up property, you get the truly awful scumbag rich buying instead. The prices go up and up. Look at Vevey, darlings. Or Lugano.

    No one owns land in Hong Kong, save the holders of St John’s Cathedral. It is all leased. The way to reduce property prices is to vigorously repossess (resume) huge tracts of derelict property in say Hong Kong Island East to start with and build the sort of towers Hong Kong people love. Oh, and make purchase only possible for Hong Kong resident low and middle income earners. The building moguls will love all the work and Hong Kong people will relish the extra noise, pollution (vibrancy)…and low prices at the end of it.


  2. Tiu Fu Fong says:

    Part of the attraction for property for the financially unsophisticated in any country is that – like many PE fund investors – they are deeply fascinated by money multiples and ignore the time value of money.

    “Hey, I bought this property for $100 in 1998 and just sold it for $200. I doubled my money! How smart am I!”

    4.7% IRR over 15 years on a property play? That’s less than ordinary.

  3. Jonathan Stanley says:

    Vis-a-vis the blind spot that lots of people (not just Hongkongers) have on the time value of money. The fact that fiat money, in it’s current digital form is perfect currency. How should the fantasy plane be reconciled with the tangible plane? Can Hong Kong do something like Vietnam? Would it fix any problems? Would it make it even worse?

  4. Mary Hinge says:

    Anyone know a decent place to buy some biohazard smoke grenades?

  5. Real Sooth Sayer says:

    It is a well-known but not much spoken-about, fact that any determined Mainland lady (young or old) can fix up a fake marriage for a mere few HK$10K . Well, not actually fake because she is legally married to a HK PR male ( often in his twilight years) who agrees – for his fee : half up front and half on completion – to be her lawfully wedded husband for the 5 – 7 years needed until she gets her HK ID, and then they immediately divorce. After that she can legally work in HK and must wait another 5 – 7 years until she gets her HK PR. Then she is home and dry . It’s long slow process, but it does indeed work very well, and I heard that many tens of thousands of Mainland ladies have used this channel to gain HK PR status

    I don’t approve of this, as I’m sure most people also don’t approve. But there a lot of very determined Mainland ladies ( and probably the same thing also happens in reverse )

    So my question is : how long before we see proxy HK PR residents buying property on behalf of Mainland buyers? Not long I guess.

    BTW: not a few columnists who know their stuff ( Jake for one) were very critical of this new scheme.

    And as for John the-great-giveaway Tsang looking good, let alone thinking up any good policy : pigs will fly sooner than that

  6. Chimp says:

    Yes, but when you buy a property for $100, you are actually buying it for around $30, then paying around $2.80 a year until you sell it. If you then sell the property for $200 after 15 years, you have done reasonably well; comparable to long term returns on the stock market.

    If you sell the property for $200 after four years, you’re quids in.

    And, unlike shares in HSBC, property is actually useful for things like stopping the kids whining when it’s raining, and complaining about how hard it is to sleep on park benches.

    Property is a forced investment.

    OK, you could rent. See my comment on kids, etc.

  7. The Regulator says:

    St John’s Cathedral converted to leasehold years ago

  8. Bela Lugosi says:

    A better BLUE:

    by Sir Arthur…might be a HK elegy.

  9. gunlaw says:

    By introducing this Buyer’s Stamp Durty, the Government has (a) removed an entire asset class for HK pension funds; and (b) put a floor under property prices.

  10. Stephen says:

    As all who have eyes in their head know this is not John Tsang. This is CY doing pretty much what he said he would do whilst “campaigning” (it’s inverted because to whom was he exactly campaigning too) with his HK first – maternity wards, property…

    It’s ballsy and at least he’s trying to do something so let’s see if it has the desired effect. If he crashes the property market there could be some nice pickings for anyone holding cash.

  11. PropertyDeveloper says:

    It’s finely calibrated to have some effect, especially on evil “speculators”, but not be too disruptive, insofar as can be judged at this stage, while keeping some ammunition in reserve. (No doubt all the post-hoc pundits will pass judgement from a safe distance of a month or two.)

  12. Joe Blow says:

    I can’t wait for the property house-of-cards to come tumbling down, like the walls of Jericho (cue: Herb Albert blowing his trumpet).

    That day I am going to celebrate, if necessary in that awful Lan Kwai Fong.

  13. Dream On says:

    “You can put your wealth into stocks, bonds, commodities, precious metals, farmland, futures, with long and short variants, from across an entire planet. But for grim-faced masochists petrified of losing a few percent of their millions to inflation, the only possible asset is concrete boxes in one city in East Asia. ”

    Urhm… actually almost all those items you so casually tick-off have appreciated in value vis-a-vis the dollar’s decline. Also… While mainlanders are piling in here… Hongkie speculators are driving up concrete box prices in across the Pacific from KL to Sydney to Hongcouver and LA.

    The Hong Kong leadership still doesn’t understand the wealth-gap thing. If you can afford 4-6 cement pads across five cities… paid in cash… what’s a measly 15% to do? As usual the people attempting to secure their first home, or heaven forbid… try to also play with the big boys and earn a few measly pennies from home flipping are locked out.

    Property and politics. Is there reaaaaally nothing else going on in your Hong Kong? What a dreary existence.

  14. Real Tax Payer says:

    Hot off the press from David Webb:

    First it was the “HK land for HK Permanent Residents” policy on new residential land leases. Now the Government is proposing a discriminatory form of taxation – a “Buyer’s Stamp Duty” of 15% on any person who is not a Permanent Resident (PR) and buys a home in HK. That is a status that most new arrivals can only get after 7 years of residency.

    This marks a dangerous precedent – for the first time, the amount of tax you pay depends on your immigration status in Hong Kong. You can come here to work, and you must then pay salaries tax, but you can’t spend your earnings on a home without paying more tax than the permanent resident sitting next to you. If the proposal is passed, then it lays the path for other possible discriminatory taxes – for example, the Government might propose that non-Permanent Residents pay salaries tax at higher rates, claiming that they are “taking jobs” from PRs, or they might charge higher stamp duty on tenancies with non-PR tenants, because they are putting upward pressure on rents for apartments that PRs might rent.

    This is at odds with the often-stated Government goal of social harmony and its calls for Acceptance of New Arrivals in HK. The video opens with “No matter where we came from, or how long we’ve been here, we are all part of the Hong Kong family”. Yeah, right. By telling PRs that they are special, the Government strengthens the “them and us” mentality. And yet, if you are a “foreigner” like Google, and want 2.7 hectares of cheap land for a data centre, creating fewer than 10 permanent jobs per hectare (25 in all), then no problem! At a plot ratio of 5, a site of that area could produce 135,000 sq.m. (1.45m sq ft) of floor area, or about 2,400 homes. Google paid about HK$102.6m for the site, assuming they sealed the deal after premiums went up on 24-Aug-2011. A residential site of that size in Tseung Kwan O would cost about $4k per sq ft of floor area, or around HK$5,800m. Have we got our priorities right? Anyone for a new industrial estate, Cyberport, or Science Park?

    Another possible discriminatory tax would be a selective sales tax on all things, not just apartments, to deter mainlanders from crowding into our shops and buying things to take home. We could have a sales tax for which PRs (on production of their ID card) are exempt, but non-permanent residents (who have no vote) and non-ID card holders pay, let’s say (picking a number out of thin air), 15%?

  15. Vile says:

    The precedent was already laid down with the $6,000 cash give away (but-its-no-a-tax-rebate-honest) to everyone except non-permanent residents.

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