Download I. Background

This worksheet aims to help students explore the pros and cons of government interventions in
economic activities.
(B) Pay attention
to the
characteristics
of these people.
(C) Pay attention to
the characteristics
of these objects.
(A) Note the
special
features of this
object.
Source: Zunzi, Apple Daily, 28 October 2012, with English translation.
1.
Why is "water" used in this cartoon to represent the new taxes to cool the property
market? What does “heat” in the title refer to?

Because people generally believe that the property market is overheated and
water can provide some cooling effect.

"Heat" refers to the temperature, which means that the temperature in the
property market is too high, or the property market is overheated.
2.
Try to find out the message that the cartoonist is trying to convey based on the hints
indicated by labels (A) and (B).
(A)
Expressions and actions of characters
Meaning conveyed by characters
or characteristics of objects
or objects
The arch symbolises the government
Arch.
headquarters.
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(B)
3.
Expressions and actions of characters
Meaning conveyed by characters
or characteristics of objects
or objects
Financial Secretary pours a bucket of
Financial Secretary (the government) is
water on the citizens.
implementing the financial measures.
In the cartoon, the water is poured from a higher level to the people below. What does it
represent?


The government adopts a free
market policy.
4.
The government interferes with
the free market.
Take the levy of new taxes as the government’s measures to cool down the residential
property market as an example, analyse the reasons why the following stakeholders may
support or oppose the related measures. (Challenge question)
Teachers may
allow students
to choose one
or more
stakeholders
and answer
from their
viewpoints,
but they must
provide
reasonable
and relevant
explanations.
Stakeholders
For/against
Why the stakeholders may support or oppose

Short-term supply in the property market may
decline, making it harder for them to buy
Against
properties in the short term.
Residents
who do not
own any
properties

Government intervention has helped reduce
property prices, and allow people to resolve
For
their housing problems.

They are worried that government intervention
in the property market may lead to a decline in
Detailed
information is
provided in
Reference II
for the last
part of this
exercise.
Residents
who own
properties
Against
property prices. This may lead to a decline of
asset of families that own properties.

Short-term supply in the property market may
decline. The prices of their properties may
For
rise.
Property
developers
Against

These measures may lead to a decline in
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Teachers may
allow students
to choose one
or more
stakeholders
and answer
from their
viewpoints,
but they must
provide
reasonable
and relevant
explanations.
Stakeholders
For/against
Why the stakeholders may support or oppose
property prices. This would affect Hong
Kong’s overall economic performance and the
profits of property developers.

Short-term supply in the property market may
decline. Property prices may rise and the
For
profits of the developers may also rise.

Due to the substantial decline in property
transactions, real estate agents who rely on
Against
commissons will have lower incomes and this
Real estate
agents
will affect their livelihood.

For
5.
In the long run, the property market will be
stable.
The government has the responsibility to intervene and one of the reasons is to stabilise
the Hong Kong economy. Using the intervention measures for the residential property
market as an example, explain the government’s role in stabilising the Hong Kong
economy. Briefly explain your answer.
The government has introduced anti-property speculation measures with the hope to
change irrational expectations in the society that property prices will keep going up
unceasingly.
This helps reduce the risk of a property market bubble and its adverse effects on the
Hong Kong economy, and allows the Hong Kong economy to develop steadily.
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I. Background
In October 2012, Financial Secretary John Tsang announced two measures to address
the issue of soaring residential property prices. One of them was to extend the restriction
period of the Special Stamp Duty from 2 years to 3 years. Buyers (non-permanent residents of
Hong Kong, local and non-local companies) are required to pay 15% Buyer’s Stamp Duty on
top of the existing stamp duty. In February 2013, the government further increased the Buyer’s
Stamp Duty (Double Stamp Duty). Mr. Tsang said that these new measures were extraordinary
measures in exceptional circumstances. It demonstrated that the government is determined to
ensure the stability of the Hong Kong property market.
Property prices in Hong Kong increased significantly in 2012, with nearly 30% of price
increase for small and medium sized units in one year. Some market analysts said that prices
may fall after the measures were introduced owing to the psychological impact on buyers.
Non-local buyers may be discouraged from buying residential properties in Hong Kong
because the additional stamp duty has impact on them. However, the Real Estate Developers
Association of Hong Kong said that the new measures introduced by the government were too
radical as this not only affects genuine buyers but also affects real estate developers in their
deployment. Some people think that while the new measures may be able to cool down the
property market in the short term, they have affected the competitive environment of the Hong
Kong free market.
Source: Composite sources.
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II. The impact of a series of government measures for
residential property market on different stakeholders
The impact of government intervention of residential properties
Residents

who do not
own any
Government intervention has helped reduce property prices, and
allow people to resolve their housing problems.

properties
The measures helped reduce property purchases by non-permanent
residents of Hong Kong and corporate buyers. First-time home
buyers will then have more opportunities to buy properties.

The costs of transaction increase because the restriction period of
the Special Stamp Duty is extended to three years, together with the
increase in Buyer’s Stamp Duty. Short-term supply in the property
market will decline, making it harder for them to buy a property in the
short term.

The increase in stamp duty and the tightening in mortgages have
increased the costs for buyers.

Reduced developers’ sentiment in land acquisition and investment
may reduce the long-term supply of private flats, making it harder for
potential home buyers to buy properties.
Residents
who own
properties

They are worried that government intervention in the property market
may lead to a decline in property prices. This may then lead to a
decline in the asset value of families that own properties.

The costs of transaction increase because the restriction period of
the Special Stamp Duty is extended to three years, together with the
increase in Buyer’s Stamp Duty. This will work to reduce liquidity in
property assets and people’s intent to acquire additional properties as
investments.

Many investors regard property investments as an anti-inflation tool.
The measures associated with government intervention have
reduced the opportunity for residents to offset inflation using rising
property prices.

Short-term supply in the property market may decline. The prices of
their properties may rise.
Property

developers
These measures may lead to a decline in property prices. This will
affect Hong Kong’s overall economic performance and the profits of
property developers.

As the introduction of the property market intervention measures is
unexpected, this may affect property developers’ short-term and
long-term development plans for the Hong Kong real estate market.
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
The impact of government intervention of residential properties
Short-term supply in the property market may decline. Property prices
may rise and the profits of the developers may also rise.
Real estate
agents

Due to the substantial decline in property transactions, real estate
agents who rely on commissions have lower incomes and this will
affect their livelihood.
Source: Compiled from various sources.
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