Sunday, 24 February 2013

A Doer-Upper View from Hong Kong

There were two big events in Hong Kong over the last week.

My stepson's engagement party.

And a dramatic rise in local property taxes.

Fabulous though the party was, I'll spare you the envy a full description would inspire and focus on property.

On Friday the government shook local speculators (that's investors to you and me) by doubling stamp duty on properties above HK$2m (£170,000) for non residents, corporates and various other classes of buyers.

At the same time, they imposed the first significant tax on properties under HK$2m.

Unlike the UK, they didn't pause to test public reaction to this proposal, or even run it past parliament. Within just 24 hours the new taxes were in place.

This resulted in an almighty scramble to sell (and buy) properties before the new taxes took effect. Literally hundreds of sales went through in one day - mainly new builds.

The government also imposed strict new controls on lending criteria to make mortgages harder to obtain.

It's all designed to take some of the heat out of a property market that's recently made London look like a sleepy backwater in terms of price rises.

As I stood, terrified, on a wind whipped 50 square metre roof top thirty two floors above the city at Saturday night's party, it was soon apparent how obsessed locals have become with property prices. Instead of pointing out the extraordinary night-time sights across the island and over in Kowloon, they were busy discussing the relative value of the multitude of apartment towers lit up around us. " Over there is some of the most expensive real estate in Hong Kong, isn't it fantastic", someone said as they pointed to yet another typically thin, tall, stalk of a block.

It's an obsession the government here is clearly worried will turn into a disastrous 'bubble'. Hence this week's new taxes.

I love HK for two reasons. It's home to my stepson and his future wife. Take those away and I probably wouldn't come back, if I'm honest.

These days the city itself is pretty much one large designer shopping mall with offices and flats stacked on top. Pollution from China's nearby industrial cities (denied by the authorities) means the skies are rarely clear. And, apart from very cheap taxis, the cost of living seems to have spiralled to near UK levels.

It has its good points, of course. It feels safer than London. There is no apparent 'yob' or 'booze' culture. The people (both western and local) seem hard working, aspirational and smart. Help, in the form of maids and nannies, is cheap. And, apart from property, taxes are unbelievably low.

But would anyone live here from choice, as opposed to economic necessity/desire.

Even my future step daughter-in-law (is there such a thing) is thinking of moving when they eventually decide to have a family. She simply doesn't see HK as a place to bring up children any longer, and as a very successful businesswoman she has a choice.

If you're young, I guess the fast pace,  thrusting energy and relentlessly materialistic atmosphere  is a 'buzz'. And certainly, placed as it is at the edge of mainland China, there's a sense that this is the future, the real epicentre of global trade and power.

But as I sit beneath the towering stalks (like a modern day San Gimignano) I long for the humanity of a London square or the elegance of a Paris boulevard.

You might make money somewhere like this. Or in Kuala Lumpur, or Singapore or Dubai (you name it). But where will that money choose to gravitate when it wants to educate its children or simply wander quieter streets and live in bigger spaces with patches of garden.

Well, one of those places is London, of course.

Why pay £10m to live on the 30th floor of a tower, when in Egerton Terrace £12m will buy you stucco fronted elegance, 4000 square feet, maybe a basement pool, certainly a garden of your own and the chance to step out of your own front door and wander round to Harrods or Harvey Nics for a spot of retail therapy.

That's why I hope the idea of a mansion tax remains only an idea.

Hong Kong may need to cool its property market with higher taxes, but I'm not sure London has the same issues. A few developments like the new Battersea power station aside, price rises in London seem driven by real demand rather than by hysterical speculation. People are buying into the place as much as the market.

In the absence of the same cut-throat commercial environment as modern, largely Asian, hubs London's main hope therefore is to retain its appeal as a place to live (or at least own a home).

I fear that charm and character and multiculturalism won't be quite enough if we punitively tax these wealthy world wanderers.

And that would be a disaster both economically and socially.

Still, must go. Have to grab a cheap taxi round to my stepson's flat for supper on his 22nd floor roof. (Don't they know I absolutely hate heights!!)

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