Sales of luxury flats reach new peak

PUBLISHED : Thursday, 11 November, 2010, 12:00am
UPDATED : Thursday, 11 November, 2010, 12:00am

Luxury home sales in Hong Kong have reached new peaks despite the government's efforts to cap rising prices.

Both by transaction number and value, upmarket home sales - those valued at more than HK$20 million - have broken records, defying cooling measures such as higher stamp duty and a crackdown on speculation.

Although the government raised stamp duty on transactions of properties valued at over HK$20 million from 3.75 per cent to 4.25 per cent from April, data from Centaline Property Agency showed there were 2,628 sales of luxury homes from January until early this month, involving HK$102.9 billion.

These figures have already surpassed full-year figures recorded since 1996, including the red-hot years of 1997 and 2007, when there were 2,240 and 2,399 transactions respectively.

In a written reply to the Legislative Council yesterday, the secretary for financial services and the treasury, Professor Chan Ka-keung, said including commercial and other categories of property there were 3,223 transactions valued at more than HK$20 million between April and October, up 86 per cent on last year.

The amount of stamp duty involved was HK$6.16 billion, an increase of 127 per cent compared with the same period last year.

The continuing buoyancy of the real estate market continued not only after the increase in stamp duty in April, but after the government and the banking regulator in August introduced more measures to ban quick flat resales, pledged to put more land up for sale and cracked down on mortgage lending for pricier properties.

Research last week by the Hong Kong Monetary Authority showed that the average price of a luxury flat was 14 per cent higher than the previous historic peak, reached in the third quarter of 1997.

'The government doesn't have the ability to cool the property market, unless it is going to damage the basic principles of our economy,' said Eric Wong Chun-yu, co-head of Asian property research at Swiss investment bank UBS.

Since the market was relatively weak last year after the global financial crisis, he said it was normal to see an increase in the transaction numbers year-on-year.

Wong expected home prices to surge by about 35 per cent by the end of next year because the economy was doing well, with incomes increasing and the interest rate and supply of new flats remaining low.

The financial minister said that by the end of last month, the Inland Revenue Department had finished examining 3,600 cases of 4,300 suspected cases of property speculation in 2008-2009.

Of the examined cases, 1,650 were found to be liable for tax for profits derived from property transactions that were not reported in the tax returns filed by the taxpayers. The amount of profits tax involved was HK$410 million, Chan said.

He warned that for overdue tax, the department would take recovery measures immediately, such as imposing a surcharge.

It might also initiate bankruptcy or liquidation proceedings for the default cases, and apply to the District Court for a direction to prevent the defaulting taxpayer from leaving Hong Kong.

Under the Inland Revenue Ordinance, property speculators are normally deemed to be carrying on a business and are charged profits tax. They have to submit returns and pay tax on the profits.

For corporations, the profits tax is 16.5 per cent, while for unincorporated businesses - including individuals carrying on a business - the rate is 15 per cent.