Tax takes huge toll on sales, industry
Real estate body chief says sales volume is a fraction of the level before the launch of the stamp duty and thousands of jobs are in peril
Hong Kong's real estate industry has grown rapidly in the past thanks to the city's famously non-interventionist economic approach.
But those heady days appear to be over with one of the biggest brakes on players' profits now government policy, according to Real Estate Developers Association (REDA) chairman Stewart Leung Chi-kin.
Hong Kong developers have been through several boom and bust cycles over the decades due to financial crises and political uncertainties, according to Leung. "But we have never suffered business difficulties due to government measures," he said. The new property tax known as the buyer's stamp duty was introduced in late October.
The tax is equal to 15 per cent of the transaction price and applies to company buyers and non-permanent residents. Its aim was to drive down soaring housing prices.
Leung said the measures had led to a plunge in home sales to about 30 per cent of the volume before the tax was introduced.
Some developers were forced to pay agents a commission of as high as 5 per cent of the transaction value to help speed up sales. The normal rate is between 1 per cent and 2.5 per cent.
"This not only affects developers, but also has a knock-on effect on other industries such as the property brokerage business," he said.