15 per cent stamp duty
To rein in the city's runaway housing prices, Hong Kong's Financial Secretary John Tsang Chun-wah announced an additional 15 per cent stamp duty on non-permanent-resident and corporate buyers starting from October 27, 2012. The move prompted speculation over the effectiveness of taxation on the real estate market and criticisms that Hong Kong was turning away from its roots as a free market economy in favour of a more protectionist market environment.
Cheung Kong's Justin Chiu says stamp duty unlikely to hit home prices
As secondary market hits new high, developer says residential property still a safe buy
The city's new stamp duties are unlikely to hit Hong Kong home prices as residential property is still a good investment in the city's low-interest-rate environment, according to Cheung Kong (Holdings) executive director Justin Chiu Kwok-hung.
"The home market has probably been too hot in the past two to three months," Chiu said, adding that prices have risen faster than he expected.
His remarks came as Centaline Property Agency' s secondary home price index hit a record high yesterday. The Centa-City Leading Index closed at 116.07 for the week to November 4, a week after the government announced the fresh measures. The index's benchmark of 100 reflects prices in July 1997.
On October 26, the government said non-permanent residents and corporate buyers would have to pay an extra 15 per cent stamp duty on home prices. The added duty, which took effect the next day, came on top of other duties aimed at checking speculation. Data compiled by estate agency Ricacorp Properties show that in the 50 housing estates it monitors, 139 flats were sold in the week from October 29, a drop of 40 per cent from the week before.
Centaline says home prices could start dropping by 5-10 per cent by the end of this year as sales remain weak.
Chiu, speaking on the sidelines of the MIPIM Asia property conference, said prices had spiked because of hot money inflows following the latest round of monetary easing in the US and as interest rates had stayed low.
"Residential property is still a safe investment," Chiu said. Despite the slide in sales after the new measures, he predicted prices would be stable, adding that homes will be more affordable when new supply comes into the market in three years.
Citing Centaline data, Chiu said the affordability ratio, a measure of mortgage instalments relative to household incomes, rose to 45 per cent, meaning fewer people could afford to buy a home. "It is an appropriate time for the government to do something," he said, but added: "As a developer, of course we don't like the measures."
Cheung Kong will test the market soon when it starts selling its residential development One West Kowloon in Lai Chi Kok.
Chiu said he expects the project to be supported by local homeowners who want to trade up. The company also had no plans to offer cash rebates to attract buyers.