Many of their local governments have a huge share of revenue coming from land sales to fund their operations and development, so they have vested interests in keeping land prices high. Thus, to make a profit, property developers have to build higher to maximize the number of units sold. If property price becomes unaffordable, they can then shrink apartment sizes so that the same plot ratio can yield more units.
Taller buildings, higher property prices, smaller apartment sizes; you have to pick at least two of them in the cities, or in some cities all three of them lol.
It's the HK model; to raise revenue via land sales and not through taxes. There isn't really a lack of land per se. In recent years, China's central government has been trying to pivot away from this model because they know it's not sustainable, but it's not easy for the local governments and developers. The idea of an annual property tax has been floating for years now, but it hasn't been implemented on a large scale.
And from the people's POV, I've already paid my due 'taxes' with high property prices and monthly mortgage loans, and now you want to levy an annual property tax on top of high property prices?
Thankfully in Singapore the constitution bans the government from spending proceeds from land sales. Otherwise we could've been trapped in a similarly situation like in HK with our relatively low taxes and limited land. Instead of raising taxes or cut spending, we just price our land higher.
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Is a tax hike inevitable? Why can't we use more of the reserves? Insight examines these issues after PM Lee Hsien Loong signalled that a tax hike is on the horizon. Read more at straitstimes.com.
www.straitstimes.com