New property tax introduced for non-local buyers

PUBLISHED : Friday, 26 October, 2012, 7:35pm
UPDATED : Friday, 26 October, 2012, 7:52pm

The government took aim at the city’s overheated property market with another round of cooling measures on Friday, including a new levy on foreign buyers.

Financial Secretary John Tsang Chun-wah said the new levy – 15 per cent of the transaction price – will apply to non-residents and all companies, including local and overseas ones, that buy flats in the city.

A second measure extends the current special stamp duty on property resales. People who sell a property within three years of buying it will be taxed up to 20 per cent. The existing levy covers resales within two years of purchase and a tax of up to 15 per cent.

Both measures will come into effect on Saturday.

Tsang said the new measures would curb demand in the market and supplement other cool-down measures and plans to increase the supply of new flats.

The property market had become “severely out of reach” for many Hongkongers while the economy remained stagnant, with slowing retail sales and exports but rising inflation, he noted.

“Property prices have recorded a 20 per cent increase so far this year. The rises are [moving] in the opposite [direction from] the economy and become unaffordable for Hong Kong people,” he said.

Tsang said he expected more capital to flow into Hong Kong after the United States launched its third round of quantitative easing in September, thereby adding to the demand for flats in the city.

“There is a need to launch the new measures to control the demand,” he said.

Foreign investors accounted for 19 per cent of all buyers of new flats last year, up from 13.7 per cent in 2010 and 5.7 per cent in 2009, according to government figures.