Steven,
just want to throw in my 2 cents regarding RE in HK .....
A few years ago, HK government was reporting another surplus year while personal and corporate income tax are both far below international averages. I was wondering why? It was explained to me that real estate is actually the hidden form of taxation in HK. The number one revenue source for the HK government was from land sales (I don't have recent numbers but can only assume this remains same). The HK government controls the supply of housing units each year, holding the card to half the supply/demand equation.
Since everyone needs housing, be it ownership or renting, high RE value equates higher taxes. Through out the RE boom years, the government has always released less units than demand, keeping the prices artificially high. On one hand, HK has a limited supply of land. On the other hand, HK actually has a limitless supply. Whereas 10 acres is hardly enough for Bill Gates garage in the US, the same could provide housing for thousands, stacked 60 stories high. Further more, if they need more land, just fill in the ocean.
After the takeover, one of Tung's first policy decisions was to release more housing units. Many blame that move as the cause of HK's real estate crash. In reality, this can be viewed upon as a tax reform, reducing taxes of the lower tax bracket at the expense of the high bracket taxpayers.
Your friend had stated the positive effect of the real estate "crash". While politically correct and socially equitable, it has a devastating effect to the paper wealth of HK. Since RE and the stock market are the two biggest assets for the people of HK, some opined that the crash of these two categories is in essence a devaluation of the HK$. Instead of a typical devaluation, where a holder holds the same amount of $$ which is only worth a fraction of the before value, HK$ remained the same but individuals' net worth had just been wiped out by 30+%.
Still very difficult to figure out HK's future. Could you shed some light on what type of deals your friend claims the deal makers are doing? Are these "numbers games" type deals or are they ones that will have some positive impact to the economy?
Ramsey
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