Richard Cullen on Real Estate Price Inflation - Lessons from Hong Kong

"Real Estate Price Inflation: Lessons from Hong Kong"
Richard Cullen
TLRP Tax Comments, No 3
June 2016

Abstract: The primary purpose of this TLRP Tax Comment is to review the ways in which behavior-modifying fiscal measures – in particular Stamp Duty (or any like impost) – can be deployed to help bring the problem of excessive home-price inflation under greater control. 

     In cities across the developed-world, especially (today) in jurisdictions popular with Mainland Chinese immigrants, there have been deep concerns expressed about rapid, residential real estate price inflation. It is argued that such inflation is putting home ownership beyond the reach of increasing numbers of younger, local residents seeking to buy their first home. In early May, 2016, it was reported that the benchmark price for a house in the Vancouver Region was C$1.41 million (around HK$8.35 million) – up 30.1% in one year. 

     Although the lessons offered by Hong Kong potentially have quite wide application, the principal comparative focus in this essay is on Vancouver, in view of the stand-out nature of the price inflation problem in that city. The essay briefly reviews certain related issues which are associated with this public policy challenge. There also is a short discussion on why the recent innovative use of Stamp Duties in the HKSAR remains compliant with the Basic Law of the HKSAR (BL).

     There is no “magic wand” fix for this set of problems. Hong Kong has, however, done more than most, in an effective way, to bring the problem under a level of control. There is, Richard Cullen argues, much that Vancouver (and other like-affected cities) could learn from the HKSAR.

     Richard Cullen is a Director of the Taxation Law Research Programme (TLRP) within the Asian Institute of International Financial Law (AIIFL) and a Visiting Professor in the Faculty of Law at The University of Hong Kong. He is also an Adjunct Professor in the Faculty of Law at The University of Western Australia.  Please download the essay from here or at http://www.law.hku.hk/aiifl/taxation-law-research-programme-tlrp/.