Flat buyers back off as tough new property tax hits home in Hong Kong

A surprise property tax hit home as fast as it came - within 24 hours of the introduction of a higher stamp duty, people were shunning flat sales across the city.

Ministers rallied behind the tax and other new measures. They expressed confidence they would cool Hong Kong's super-hot property market; if not, they had plenty more initiatives "up their sleeves", one said.

The measures came into effect at midnight on Friday, just hours after Financial Secretary John Tsang Chun-wah had announced them.

He imposed a 15 per cent stamp duty on home purchases by non-permanent residents and companies, extended the special stamp duty on quick resales and raised the rates for the duty.

In less than six hours, buyers snapped up 100 flats at a Yuen Long development to beat the new stamp duty on buyers.

Secretary for Development Paul Chan Mo-po said on radio that the government needed to act swiftly. He dismissed concerns the measures would affect the city's competitiveness, saying they were aimed at tackling a fast inflow of hot money. "We have to react to the market. For things coming fast and fiercely, our measures have to be [launched] faster, more fiercely and accurately," Chan said.

The government raised by 5 percentage points the rate at which it levies the special stamp duty on sellers introduced two years ago to curb speculation, and extended its effect on resales from two to three years. The rates now range from 10 to 20 per cent.

On another radio show, Secretary for Transport and Housing Professor Anthony Cheung Bing-leung said that without new initiatives, the property bubble could burst, dealing a serious blow to livelihoods.

Chan expects prices to drop by10 to 20 per cent.

"Home buyer discouraged by new property tax" Video by Hedy Bok