Demand for flats falls by half in wake of stamp duty rises

The latest measures to rein in Hong Kong's property market had an immediate effect yesterday, with agents reporting a 50 per cent drop in deals for flats.

Developers hoping to complete sales programmes looked for ways to fight the impact of sharp increases in stamp duties.

They increased the commission for agents - some of whom were passing on the increase to buyers to make up for the extra duty they will pay.

"The secondary market has almost become a sleepy backwater, with sales volume plunging by more than half," Willy Liu Wai-keung, chief executive of real estate broker Ricacorp Properties, said.

"Buyers are worried they will buy something too expensive, while sellers are panicking that they may sell their flats cheaply, so they now wait and see."

Other agents said not many people were looking for flats.

On Friday, the government announced a doubling of stamp duties on home and non-residential properties valued at more than HK$2 million. Stamp duty on properties costing less than HK$2 million rose from a flat rate of HK$100 to 1.5 per cent of the transaction price.

The only people exempt from the higher rates are first-time buyers, those who do not own other homes and those selling their only flat and buying a new one within six months.

Those forced to buy a flat because of urban renewal might also be exempted, Barry Cheung Chung-yuen, executive councillor and chairman of the Urban Renewal Authority, said.

Developers rushed to complete planned flat sales on Friday evening following the announcement of the new measures, which came into force at midnight.

Sino Land sold 36 flats at The Avery in Kowloon City on Friday. However, by 6pm yesterday it had sold only one flat there.

"I first planned to buy a large unit but now I'm thinking about a smaller one instead due to the new measures," a mainland buyer said outside the sales office.

Henderson Land and New World Development sold 20 flats at their joint project The Reach in Yuen Long yesterday, according to property agents. They said the developers had increased agents' commission from 2.5 per cent of the sale price to up to 3.5 per cent.

Sun Hung Kai Properties also raised commission for agents selling flats at Residence 88 in Yuen Long.

New World Development chairman Henry Cheng Kar-shun backed the government's moves, saying: "Home prices have been rising, and cooling them down a bit is appropriate."

Benjamin Hung Pi-cheng, the Association of Banks' chairman, said new mortgages may drop by 30 per cent, in part because of strict affordability rules also imposed by the monetary authority.