Higher stamp duties to cool Hong Kong's property market finally became law yesterday amid a flurry of grandstanding in the Legislative Council.
The duties, which have been levied since October 2012, were approved after a marathon 35-hour debate over four days.
The vote removes uncertainty in the property market by giving effect to a 15 per cent levy on non-permanent residents and corporate buyers and an expansion of duties paid on quick resales of property.
A defeat could have meant the government paying back an estimated HK$4 billion it has collected in the past 16 months.
The measures have wide public support, but their approval was held up as lawmakers sought a legally binding say in future stamp duty decisions.
In the end, just after 4.30pm, 23 pan-democrats walked out of the Legco chamber in protest at not getting the law change they wanted. The bill authorising the duties then passed by a wide margin of 30 votes to six, with six abstentions.
Controversy continued when it emerged that Jeffrey Lam Kin-fung of the Business and Professionals Alliance - who is also an executive councillor - was not present for the vote, sparking disquiet in the government camp. Lam refused say why he was absent when asked last night.
The pan-democrat walkout was in protest against housing minister Professor Anthony Cheung Bing-leung's refusal to offer more than a verbal promise that future rises in stamp duty would require legislative scrutiny. Reductions will still be subject to "negative vetting" - meaning they will go through unless lawmakers object.
The pan-democrats argued that this "verbal commitment" went against the spirit of the rule of law and accused Cheung of being disrespectful to legislators. Cheung, who said he was surprised by the furore his move caused, promised to "seriously consider" the pan-democrats' request for an official amendment.
Among the 30 who voted for the bill were two pan-democrats, the League of Social Democrats' "Long Hair" Leung Kwok-hung and the NeoDemocrats' Gary Fan Kwok-wai.
The pro-government Democratic Alliance for the Betterment and Progress of Hong Kong, the Federation of Trade Unions and the New People's Party backed the bill, while four Liberal Party lawmakers, real estate and construction sector representative Abraham Razack and independent Paul Tse Wai-chun voted against it.
Six others - People Power duo Albert Chan Wai-yip and Raymond Chan Chi-chuen and four from the pro-government Business and Professionals Alliance - abstained.
Cheung expressed relief' after the meeting. He said negative vetting was intended to eliminate market uncertainty. It was a misunderstanding to think that the government was trying to use it to bypass Legco, he said.
But Civic Party leader Alan Leong Kah-kit was not convinced. "Replacing legislation with a verbal promise is [tantamount to] replacing the rule of law with the rule of man," Leong said. "The Civic Party could have sat there in the chamber and voted in disapproval of the administration, but since the bill itself is good for the people, we chose to walk out."
Democratic Party lawmaker James To Kun-sun also told the government to make its position on the mechanism for scrutinising stamp duty changes clear soon.
Analysts said the imposition of the stamp duties had popped the property market bubble.
Brokerage house CLSA projects a 10 per cent drop in prices this year and a further 5 per cent drop next year.
Developers began offering big discounts to sell flats in November. This has meant flats in new developments selling for 20 to 30 per cent less than equivalent homes in the secondary market.
Targeting the stamp duty at non-local buyers has also been effective in squeezing out mainland investors. Property agency Centaline estimates 42 per cent of buyers of new homes were non-local before the 15 per cent additional levy on non-local buyers was introduced. Today, that figure was in the "low single digits", CLSA's Nichole Wong said.
Midland Realty chief analyst Buggle Lau Ka-fai, speaking from a property industry perspective, hoped the government would be as aggressive in reversing its measures when the market drops as it was in implementing policies when prices were going up.
Additional reporting by Jasper Moiseiwitsch