Land value capture mechanisms in Hong Kong and Singapore. A comparative analysis
| Pages | 76-100 |
| Date | 01 February 2004 |
| Published date | 01 February 2004 |
| DOI | https://doi.org/10.1108/14635780410525153 |
| Author | Eddie Chi‐Man Hui,Vivian Sze‐Mun Ho,David Kim‐Hin Ho |
| Subject Matter | Property management & built environment |
Land value capture
mechanisms in Hong Kong and
Singapore
A comparative analysis
Eddie Chi-Man Hui and Vivian Sze-Mun Ho
Department of Building and Real Estate,
The Hong Kong Polytechnic University, Hong Kong, and
David Kim-Hin Ho
Department of Real Estate, National University of Singapore, Singapore
Keywords Hong Kong, Singapore, Value analysis, Public revenue
Abstract Hong Kong and Singapore are characterized by rapid economic development and a
high population density of 6,250 and 6,055 per km
2
land respectively. Land revenue is their major
source of income to finance their public infrastructure and social services. Their design and
collection of taxes on land, their value-capture instruments and their allocation of revenue for
public works are examined. The article finds that there are some similarities between the two cities
in capturing land value, such as the collection of annual rates and stamp duty on property. The
differences include the adoption of property tax surcharge and the development charge. In fact,
each mechanism has its pros and cons. The method and the extent of each mechanism depend on
the goals of the government in respect of the social and economic conditions.
Introduction
Hong Kong and Singapore are two small city-states where land is scarce.
They both exercise the public leasehold systems to manage the limited land
resources. According to Dale and McLaughlin (1999), “Land is a physical
thing that encompasses the surface of the earth and all things attached to it
both above and below”. Land belongs to natural resources which is
fundamental to economic growth. As suggested by Leung (1985)
With the rapid growth in population and increasing urbanization, there is a need for
governments to make provisions for the essential services the market has failed to provide.
To finance such public expenditure, immovable property is frequently looked on as a suitable
tax source, since its value is enhanced by such expenditure.
Faure (2000) believes that “Property taxes are among the oldest and most
common forms of taxation in general use. There are, however, many variations
on the theme in developed, transitional and developing countries”. He alludes to
the four basic principles of taxes-that taxes should be equitable, easily
understood, efficient and neutral in economic decision making. In general, the
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
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This study was supported by RGC and University funding (A/c Code: B-Q364 and G-460T).
JPIF
22,1
76
Journal of Property Investment &
Finance
Vol. 22 No. 1, 2004
pp. 76-100
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780410525153
tax effects of these land capture mechanisms are based on the twin principles of
economic equity (in which foreign as well as domestic land and real estate
investments are subject to the same tax rate), and economic efficiency in which
the land capture mechanisms are designed to redistribute wealth.
Hong (1998) also raised the observation that the public leasehold system
does not only capture the surplus land value, but also enables the government
to reserve land for public purposes and manage urban growth. As both places
have their real estate revenue as the major source of income to finance public
infrastructure and social services, it is therefore essential for them to capture
the land-value increment sufficiently and efficiently under the scarce and
competitive land resources. The land-value capture hereby refers to the
collection of all kinds of taxes by the government derived from land and its
attached property. By comparing the property taxation systems in Hong Kong
and Singapore, we learn how various types of taxes are designed and collected,
and how the revenue has contributed to the provision of local services or to the
economy’s growth. Before considering how the two governments capture the
land value, a comparative analysis framework is introduced in the following
section.
A comparative analytical framework
Singapore and Hong Kong have similar geographic, demographic and
economic backgrounds. Their land tenure systems are alike too. Figure 1
presents the comparative analytic framework within which to investigate the
differences in land value capturing mechanisms between the two territories.
This framework helps analyze the way and the extent to which the two
governments’ capturing mechanisms control land and capture land value. The
mechanism directly affects the revenues generated from land. The framework
specifically examines the following aspects:
.annual tax on real property;
.tax on rental income;
.tax on speculative gains from land dealings;
.tax on conveyance and the property of the deceased;
.betterment levy that may be charged for a planning permission or lease
modification; and
.land auctions and tenders.
In general, the amount of land tax revenue “revenue in” generated cannot be
fully utilized as part of it is transferred to the administration cost. The amount
of revenue that can be reallocated “revenue out” depends mainly on the
administrative efficiency and cost effectiveness of the land value capture
mechanism. In order to build an overall picture of the land value capture
mechanisms of Hong Kong and Singapore, this paper is divided into several
Land value
capture
mechanisms
77
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