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As many as 900 buyers registered to bid for 152 apartment units put on the market by Cheung Kong Property Holding. The developer sold 142 units of the Harbour Glory project within four hours. An estimated 30 per cent of the buyers showed up in groups, buying multiple units but under different names to work around a government stamp duty.Photo: Felix Wong

Exclusive | Wily buyers work around stamp duty rule by splitting purchases under different names

No sooner had the government closed a stamp duty loophole than buyers found a way to work around the rule.

Wily buyers appear to have found a workaround for the Hong Kong government’s new stamp duty rule, barely a day after the outgoing Chief Executive Leung Chun-ying announced he’s closing a five month tax loophole to help his successor to get a handle on the city’s runaway property prices.

During a Wednesday sale at Cheung Kong Property Holding’s Harbour Glory apartment project in North Point, a family bought three apartment units for a combined bill of about HK$170 million (US$21.9 million) after discounts.

Because they split their purchases into three individual names – each name not being a prior property owner – they were able to skirt the government’s 15 per cent stamp duty on multiple purchases in one go.

“It’s not illegal, but it’s creative,” said Sammy Po, chief executive of Midland Realty’s residential department. “Whenever there’s a new policy, buyers and sellers always come up with a way to minimise the impact.” Po’s realty firm brokered the purchases by two groups of customers, each buying two units of three-bedroom apartments at Harbour Glory.

One group comprises a father and his son, who each bought an apartment measuring 1,062 square feet on different floors in the same block, for a total price of more than HK$60 million, after a 34 per cent discount by the developer.

A view of Cheung Kong Property Holdings' residential development Harbour Glory (under construction) at 32 City Garden Road at North Point. Photo: Dickson Lee
“As the two flats were bought in two separate contracts, and neither of them owned properties under their names, they are not subject to the 15 per cent stamp duty,” Po said. Each buyer is liable for a 4.25 per cent duty, equivalent to HK$1.27 million.

The city’s government announced a new policy on Tuesday, whereby buyers of multiple units of apartments on the same sales contract must pay 15 per cent stamp duty for each of the properties. Before the new rules, some affluent buyers had lumped multiple properties on the same contract to avoid paying additional duty.

“Groups of buyers comprised husband-and-wife couples, brothers and sisters and other relatives, whose names have never” appeared on sales records, said Centaline Property Agency’s sales director Danny Ho. His firm brokered deals for eight groups of buyers who snapped up 17 units of Harbour Glory between them.

The workaround underscores the challenges faced by incoming Chief Executive Carrie Lam Cheng Yuet-Ngor, who’d pledged to make tackling Hong Kong’s property prices and housing affordability a key priority in her administration. The city is the world’s costliest major urban centre to own and rent a home.

Cheung Kong sold 142 of the 152 units it put on the market within hours, and followed up by making another 76 units available with sizes ranging from 437 to 1,594 square feet at an average price of HK$31,600 per square foot after discounts.

“It shows there is a shortage of good, investible assets worldwide for people to hedge against their rapidly depreciating currencies,” said Colliers International’s deputy managing director of Asia valuation and advisory service Vincent Cheung Kiu-cho. “They prefer to buy properties for long-term investments.”

That’s an encouraging sign for developers who had been bracing themselves for a drying up of demand following the government’s tightening of policies, and amid expectations of more interest rate increases to come. Hong Kong’s financial secretary had foreshadowed nine rate increases until 2019.

Separately, Sun Hung Kai Properties released 68 units of its Eight Regency apartment complex at Tuen Mun for sale, with sized from 310 to 497 sq ft at an average price of HK$12,748 per sq ft after a 20 per cent discount.

This article appeared in the South China Morning Post print edition as: wily buyers beat stamp duty rule
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