Hong Kong property shares fall on fresh housing curbs

Shares of Hong Kong property companies like Cheung Kong Holdings and Sun Hung Kai Properties fell to their lowest in nearly two months on Monday with realtors taking the bigger hit after the city’s government introduced late last Friday tougher measures to cool the market.

Property agent Midland Holdings fell as much as 6.6 per cent to its lowest in three months in morning trade, topping losses in the sector. Cheung Kong Holdings fell 1.9 per cent, while Sun Hung Kai Properties dropped 2.3 per cent. The Hang Seng Index went into the midday trading break up 0.1 per cent at 22,783.7.

Analysts expect the new cooling measures to only have a short-term effect on property transactions and said Hong Kong’s government is likely to launch further housing curbs in the near future.

“It would have immediate negative impact on the property market,” said Jennifer Wong, KPMG’s tax partner in Hong Kong. “But if Hong Kong remains in the low interest rate environment, and there is a lot of hot-money chasing in high returns, the speculation will come back.”

The Hong Kong government announced on Friday that the stamp duty for flats costing less than HK$2 million would be increased from HK$100 to 1.5 per cent of the transaction price. For other properties, the stamp duty would be doubled to as much as 8.5 per cent of the residential transaction price.

The government also said it would standardise the stamp duty regime for non-residential properties such as shops, factory space, office space and even car parks.

“It won’t be effective at all in terms of curbing home prices,” said Wong Leung Sing, an analyst at Centaline Property Agency, adding that new measures will only curb short-term demand but home prices will keep rising.

“People will keep buying homes since it’s completely useless to put money in the bank,” Wong said. “The government will definitely launch more cooling measures.”

The Centa-City Leading Index, a widely used indicator of the city’s residential price trends, is now at a record 121.7, 5 per cent higher than the same period in mid-January.

John Tsang, Hong Kong’s financial secretary, told reporters on Friday that the risk of an asset bubble is increasing.

“If we allow the bubble to grow, in the end it will affect the macroeconomy and also the stability of the financial system. It will be very damaging to society,” Tsang said.

In Hong Kong, the blue chip property sub-index has fallen 5.6 per cent so far in February amid concerns over fresh housing curbs, its biggest monthly decline since May last year. The index jumped 37.6 per cent last year.

Since October 2009, the Hong Kong government has taken a series of steps to curb prices, including a 15 per cent property tax on foreign buyers, mortgage restrictions and taxes on quick resales.