Bubble risk called for new levy, Tsang says

PUBLISHED : Monday, 22 November, 2010, 12:00am
UPDATED : Monday, 22 November, 2010, 12:00am
 

Imposing a new stamp duty to curb property speculation was the right thing to do, the financial secretary said yesterday.

Writing in his official blog, John Tsang Chun-wah said unusual measures were called for in 'unusual times'.

'As we are now in an unusual economic situation, we need to be more decisive in these unusual times and take action whenever it is needed to prevent asset bubble risk from deteriorating,' he said.

Properties purchased from November 20 onwards and sold within six months will incur a 15 per cent stamp duty. The new levy will be 10 per cent if the sale is between six and 12 months after purchase, and 5 per cent if it is later but within two years.

Tsang said in the first nine months of the year 114 per cent more properties were sold 12 months or less after purchase than in the same period last year, which showed that short-term property speculation was rampant.

'I have noticed, in the past two weeks, that ... public opinion criticising the government for fence-sitting had turned to demanding that the government not take too severe measures,' he said. 'I am very puzzled by this fickleness.

'I have been as careful as treading on thin ice in handling the property bubble risk.' He said the government could not impose capital controls because Hong Kong's was a free-market economy, nor would it overhaul the currency peg, because that was not the main cause of inflation and asset bubbles.

However, he said the government would not stand by when asset bubble risks posed a threat to social, economical and financial stability. New measures could be introduced whenever necessary, he said.

Executive Council convenor Leung Chun-ying said the new stamp duty had already been effective in curbing speculation.

'Judging from the market reaction in the past two days, I can see speculation has been restrained,' he said. 'Of course, it takes time to see the long-term effect.'

New flat sales over the weekend were slower than usual. But property agents said Azura, a Mid-Levels luxury estate, sold better than expected.

The Monetary Authority also cut the amount banks may lend to buyers of homes worth HK$12 million or more to 50 per cent of the price from 60 per cent. The ratio for properties between HK$8 million and HK$12 million was cut from 70 to 60 per cent. Cheaper homes are unaffected.

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