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Hong Kong stamp duty

Cooling tactics deflate sales of luxury homes

PUBLISHED : Friday, 06 May, 2011, 12:00am
UPDATED : Thursday, 07 May, 2015, 12:48pm


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Hong Kong luxury home sales dropped sharply last month as measures to cool the sector began to weigh on buying sentiment.

Of 7,635 home sales lodged with the Land Registry last month, Ricacorp Properties said those involving properties worth HK$7 million to HK$10 million dropped 37 per cent to 700, from 1,119 in March.

Those costing more than HK$10 million registered a month-on-month decline of 20 per cent to 671, said the agent.

'The high-end sector is mainly affected by a lower loan-to-value ratio offered by banks, higher interest rates and more conservative attitudes to property valuation,' said Patrick Chow, head of research at Ricacorp Properties.

The fall in the number of transactions also reflected the impact of a rise in stamp duty, which was reducing short-term speculation, Chow said.

Properties bought and sold within six months incur a 15 per cent stamp duty under the new measures. This is in addition to the standard stamp duty of 4.25 per cent.

On Wednesday, the Land Registry said the overall home sales volume was the lowest since March 2009.

The total value of deals was down 24.8 per cent to HK$39 billion last month.

Chow said the most affected areas were The Peak, Mid-Levels and Pok Fu Lam, with sales tumbling 46 per cent month on month.

There were 19 deals on The Peak last month, down from 35 in March, while 62 homes changed hands in Mid-Levels and Pok Fu Lam, down from 115 in March.

'Sales will be flat this month,' Chow said.

In November, the government unveiled measures designed to slow the runaway property market, including the higher stamp duty levy.

The Hong Kong Monetary Authority reduced the maximum permitted loan-to-value ratio for homes worth HK$12 million or more to 50 per cent from 60 per cent.

The maximum mortgage ratio for properties priced between HK$8 million and HK$12 million was cut from 70 to 60 per cent. It remains unchanged, at 70 per cent for less expensive homes - which are generally bought by end-users. The government also said it would increase the supply of land for home building, amid public protests that housing was becoming unaffordable.

In March, the larger banks began increasing mortgage rates based on the Hong Kong interbank offered rate (Hibor) to between Hibor plus 0.9 per cent and Hibor plus 1.3 per cent, raising effective home loan rates to between 1.11 and 1.51 per cent.

Home loans priced on Hibor previously ranged from plus 0.8 per cent to plus 1 per cent for an effective home loan rate of less than 1 per cent.

'Buyers are becoming more cautious since banks raised mortgage rates twice after the government introduced cooling measures last November,' said David Chan, a director of Ricacorp.

'It will take longer for vendors and buyers to reach an agreement.'

Measures working

Rising interest rates and lower loan-to-value ratios hit high-end sales

The number of homes sold for more than HK$10 million fell to 671 last month, a decline from March of: 20%