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.
Wenzhou's May Zheng eyes Hong Kong despite high stamp duty
Wenzhou resident goes against the trend, saying restrictions at home force her to look elsewhere
May Zheng is a rarity among Wenzhou citizens. The 25-year-old is still considering buying a flat in Hong Kong despite seeing the property market in her hometown collapse.
"Since we are homeowners already, we cannot buy more flats in our hometown Wenzhou because of the government's purchase restrictions," Zheng said.
Zheng said she and her husband spent about 6 million yuan (HK$7.38 million) for a 200-square metre, or 2,153 sq ft, new home in Wenzhou this year after marrying.
Their parents are flat owners too, so their families are not eligible to buy another residential property in Wenzhou owing to restrictions imposed by the government in an attempt to cool soaring property prices.
Because Zheng's husband often travels to Hong Kong for work and she is considering studying for a master's degree in the city, Hong Kong offers an ideal location for the couple to buy another flat - despite the city's government imposing a hefty extra stamp duty on non-residents.
"It's better to buy a property than to rent one," Zheng said, adding that her family also helped her buy a flat in Shanghai when she worked there before.
Based on the value of Hong Kong properties belonging to her mainland friends, she expects to pay about HK$40,000 per square foot, for a total of about HK$10 million.
She acknowledged that her plan went against the trend, with people in Wenzhou no longer travelling to Hong Kong or other cities to buy properties because they are "liquidity-tight and are tied up with many properties already".
She admitted that the 15 per cent buyer's stamp duty imposed by the Hong Kong government in October would dampen her enthusiasm, but it would not put her off entirely.
"Of course it would be best if we don't need to pay the new tax, but I think we still prefer to live in our own flat in Hong Kong [rather than renting]," she said. "Perhaps we will look for a cheaper one so we will be levied less."
Edward Cheung Siu-chuen, a director of realtor 18 Property Agency, echoed her view. His company, which has offices in Hong Kong and second-tier mainland cities such as Haikou , shut down its offices in Wenzhou in June because it was struggling to find buyers.
"People there don't have much spare money now. Some of them even have to sell their cars and diamonds to repay their debts," the agent said.
Cheung said one Wenzhou businessman, who ran a financing firm, had to sell his Hong Kong flat and Bentley car. Another two Wenzhou buyers fled despite paying deposits for properties worth more than HK$7 million each in Hong Kong
Wu Yuanzong, a property agent in Wenzhou who used to take groups of up to 20 investors to Hong Kong every two weeks to buy flats, has seen business dry up steadily.
"Now only those who are planning to give birth to babies in Hong Kong and have business there may consider Hong Kong properties," he said.
Chen Yongfeng, Wenzhou Real Estate Developers Association's deputy chairman, said the 15 per cent buyer's stamp duty had driven remaining Wenzhou buyers away from the Hong Kong market.
"The new tax has significantly affected buyers' sentiment about going to Hong Kong. Even Wenzhou developers can't earn a profit as big as 15 per cent," he said.