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.
He said there were more than 36,000 property agents in the city and the sharp sales drop would force more than 10,000 agents out of the market.
"What we are asking for is a level playing field. Most local company directors or shareholders are permanent residents and should enjoy the same rights as individual local buyers," he said.
The REDA had suggested that locals, including company directors, be exempt from the stamp duty for flats costing at least HK$30 million. Chief Executive Leung Chun-ying announced after an Executive Council meeting on Tuesday that the original plan to tax all corporate buyers would be upheld, citing concerns that otherwise buyers would be tempted to find loopholes in the law to save themselves large sums of tax.
Stewart Leung and other association representatives will be briefed today by officials on implementation of the new duty.
"The policy has already got support from the Executive Council. There is nothing we can do," Leung said.
Earlier, Exco member and Urban Renewal Authority chairman Barry Cheung Chun-yuen said the government was considering repaying buyer's stamp duty to developers should they complete a redevelopment within six years.
But Leung said the proposal would not work.
"Six years is definitely not enough time," he said.