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Hong Kong stamp duty

Stamp duty keeping non-locals out of property market

It's too early to conclude that cooling effect was short-lived, say analysts, as property prices in the secondary market hit a new record

PUBLISHED : Saturday, 16 February, 2013, 12:00am
UPDATED : Saturday, 16 February, 2013, 8:48am

The new 15 per cent tax on non-local and corporate property buyers has put many of them off the housing market, but sales volumes and prices have rebounded in the two months since it took effect, the latest figures show.

While observers believe it is too early to say for sure if the cooling effect was short-lived, they argue that locals buying through firms should be exempted from the tax, as figures show few speculators use companies to evade tax.

On October 27, the government imposed a new stamp duty of 15 per cent on non-locals and companies buying homes. It also raised by 5 percentage points an across-the-board "special stamp duty" on sellers to curb speculation, and extended its effect on resales from two to three years. Duty of 10 to 20 per cent of the price is payable if a property is resold in that period.

Between then and the end of January, 620 residential transactions were recorded as chargeable. Of these, 166 involved people not holding Hong Kong permanent residency - well below the 2011 monthly average of 458.

A further 454 involved company buyers. The market share of such buyers shrank from 12 per cent of all residential property transactions in November to 3 per cent last month. Despite this, sales rebounded last month to 7,136, from 3,951 in December.

The sales figures were given to lawmakers by the Transport and Housing Bureau, as a Legislative Council committee continued to vet the bill on the tax, which will take effect retroactively if passed.

The CCL property index issued by Centaline Property, which tracks prices in the secondary market, hit a new record of 121.73 points yesterday.

Willy Liu Wai-keung, chief executive of property agency Ricacorp, said the figures did not mean the new duty had proved ineffective in cooling the market.

"The total number of deals last month, 7,136, is not a high level compared to the peak in the past two years, when you had more than 10,000 deals a month at some points," Liu said.

He said the industry was wondering if a post-Lunar-New-Year boom would occur this year.

Institute of Surveyors housing panel spokesman Dr Lawrence Poon Wing-cheung also said it was too early to conclude that the tax had had little effect.

"Without the buyer's stamp duty, there could have been even bigger increases in sales volumes and prices," Poon said.

Meanwhile, the Housing Bureau reiterated that permanent residents who buy flats via companies would not be exempt from the duty, because of possible tax evasion through share transfers. However, the bureau paper showed only 29 buyers had been penalised in the past two years for using share transfers to speculate and avoid paying profits tax.