Keep rising home prices in check with land tax


Wong Toon Tuan

Published: 4:00 AM, July 17, 2017

The letter “Solution to HK’s housing woes is wishful thinking” (July 13), in response to the report “No easy fixes in sight to Hong Kong’s housing woes” (July 10), stated that property prices have rocketed beyond reach for ordinary people.

When we talk of an increase in property prices, what is really meant is the price of land on which the houses are built. Rising land prices show up in the form of higher home prices.

An annual land value tax is an approach to preventing fast-rising housing prices. If land prices are subject to such a tax, the carrying costs are divided between interest and tax payments.

If the tax assessments are updated frequently in a rising market, the part of the holding cost tied to the tax would rise in tandem with land prices.

This would discourage Hong Kong’s developers from buying land for speculative purposes in the hope of building homes at unreasonably high profits, as a huge tax would lower the price at which land is bought and, simultaneously, raise holding costs.

With land taxation, it is possible to prevent rapidly increasing prices and, in turn, housing unaffordability. For example, land taxation has been successful in America to some extent.