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Conference Paper: The unintended consequences of real estate transaction tax
Title | The unintended consequences of real estate transaction tax |
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Authors | |
Issue Date | 2020 |
Citation | 26th Pacific Rim Real Estate Society (PRRES) Annual Conference, Canberra, Australia, 19-22 January 2020 How to Cite? |
Abstract | Two rounds of Tobin-type transaction tax, known as Special Stamp Duties (SSD), were introduced in
Hong Kong's property market in 2010 and 2012 to curb speculation. This study examines the
unintended consequences of these taxes. There are four major empirical findings.
First, both rounds of SSD have raised the proportion of first-hand residential property transactions in
the housing market. This is because the SSD creates a lock-in effect which reduces the housing supply
in the second-hand market. The consequence is that potential buyers are driven to the already
concentrated first-hand market dominated by a few developers. This has strengthened the market the
power of the big developers and thus sustained housing prices.
Second, since no SSD is chargeable after a minimum holding period, a large amount of transactions
occurred right after this minimum holding period. This tax driven bunching suggests that some
properties were held for a period longer than the optimal holding period, which implies deadweight
loss.
Third, housing units subject to SSD appeared to sold at a discount in the second-hand market as a
result of the joint liability of both buyer and seller to pay SSD. Given this unclear delineation of
responsibility, there is an incentive for the buyer to pay for the SSD so that the observed transaction
prices are below market prices. This has introduced noise in the observed transaction prices.
Fourth, SSD has reduced housing market efficiency as shown by an increase in the serial correlation
of the returns on the housing price after its introduction. In addition, returns on the housing price
index exhibit a more sluggish response to that on the listed property companies after introduction of
SSD.
In sum, not only that property prices continues to escalate after the introduction of SSD, the tax has
created undesirable consequences that were not intended by the policy makers.
|
Description | Parrallel Session 5 (D1, D2,D3): The Housing Market - Paper ID 80 |
Persistent Identifier | http://hdl.handle.net/10722/290781 |
DC Field | Value | Language |
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dc.contributor.author | Chau, KW | - |
dc.contributor.author | Wong, SK | - |
dc.contributor.author | Li, KC | - |
dc.date.accessioned | 2020-11-02T05:47:03Z | - |
dc.date.available | 2020-11-02T05:47:03Z | - |
dc.date.issued | 2020 | - |
dc.identifier.citation | 26th Pacific Rim Real Estate Society (PRRES) Annual Conference, Canberra, Australia, 19-22 January 2020 | - |
dc.identifier.uri | http://hdl.handle.net/10722/290781 | - |
dc.description | Parrallel Session 5 (D1, D2,D3): The Housing Market - Paper ID 80 | - |
dc.description.abstract | Two rounds of Tobin-type transaction tax, known as Special Stamp Duties (SSD), were introduced in Hong Kong's property market in 2010 and 2012 to curb speculation. This study examines the unintended consequences of these taxes. There are four major empirical findings. First, both rounds of SSD have raised the proportion of first-hand residential property transactions in the housing market. This is because the SSD creates a lock-in effect which reduces the housing supply in the second-hand market. The consequence is that potential buyers are driven to the already concentrated first-hand market dominated by a few developers. This has strengthened the market the power of the big developers and thus sustained housing prices. Second, since no SSD is chargeable after a minimum holding period, a large amount of transactions occurred right after this minimum holding period. This tax driven bunching suggests that some properties were held for a period longer than the optimal holding period, which implies deadweight loss. Third, housing units subject to SSD appeared to sold at a discount in the second-hand market as a result of the joint liability of both buyer and seller to pay SSD. Given this unclear delineation of responsibility, there is an incentive for the buyer to pay for the SSD so that the observed transaction prices are below market prices. This has introduced noise in the observed transaction prices. Fourth, SSD has reduced housing market efficiency as shown by an increase in the serial correlation of the returns on the housing price after its introduction. In addition, returns on the housing price index exhibit a more sluggish response to that on the listed property companies after introduction of SSD. In sum, not only that property prices continues to escalate after the introduction of SSD, the tax has created undesirable consequences that were not intended by the policy makers. | - |
dc.language | eng | - |
dc.relation.ispartof | PRRES Annual Conference | - |
dc.title | The unintended consequences of real estate transaction tax | - |
dc.type | Conference_Paper | - |
dc.identifier.email | Chau, KW: hrrbckw@hku.hk | - |
dc.identifier.email | Wong, SK: skwongb@hku.hk | - |
dc.identifier.authority | Chau, KW=rp00993 | - |
dc.identifier.authority | Wong, SK=rp01028 | - |
dc.identifier.hkuros | 318282 | - |