Buyers rush to beat new duty on property deals
Investors snap up 100 new flats in Yuen Long before 15pc duty on non-local and corporate buyers kicks in at midnight to cool market
Joyce Ng, Amy Nip and Joshua But
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Buyers snapped up 100 flats at a new development last night as sales were brought forward to beat the introduction at midnight of government measures announced yesterday to cool the property market.
At 6pm Financial Secretary John Tsang Chun-wah said he was taking "extraordinary measures under exceptional circumstances" because hot money was flowing into the city faster than before. He imposed a new stamp duty of 15 per cent on non-locals and companies who buy homes - a measure market watchers described as tough.
Two hours after his announcement, mainlanders and locals were seen dashing to the Tsim Sha Tsui sales office of The Reach estate in Yuen Long, scrambling for new homes in time to avoid the tax.
The government also raised by 5 percentage points an across-the-board "special stamp duty" on sellers to curb speculation, and extended its effect on resales from two to three years. Duty of 10 to 20 per cent of the price is payable if the property is resold in that period.
A woman who arrived at 8pm at The Reach sales office said she was queueing for a Shenzhen friend who was making a late-night rush across the border.
She said her friend wanted to buy a property to support the education of her child, who was born in Hong Kong.
"She plans to use HK$14 million to buy two flats and then combine them into one."
The property sector expects prices and sales volumes to drop at least 10 per cent. But market watchers warned the measures may merely divert cash to commercial and industrial properties, pushing up rents for businesses.
The new rule sets non-local and corporate purchases of homes apart from those made by permanent residents, who will still pay between HK$100 and 4.25 per cent of the sale price.
"The property market and the economy are heading in different directions. People find home prices unaffordable," Tsang said, citing a 21 per cent price rise in the price of small and medium-sized flats since January.
"Prices in the third quarter have been fuelled further," he said, referring to the third round of monetary easing by the US Federal Reserve. "The risk of a property bubble forming is increasing. This may undermine macroeconomic conditions of the community and the stability of our financial system, threatening people's livelihoods."
He noted that interest rates would remain ultra-low at least until mid-2015.
The 15 per cent Buyer's Stamp Duty exempts permanent residents who buy homes under their own names, meaning it affects all those who make deals through companies.
The levy is higher than the Additional Buyer's Stamp Duty introduced in Singapore last year, under which foreigners and non-individual buyers are levied 10 per cent of a home's value.
Buyers who were not permanent residents accounted for 19.5 per cent of new-home purchases last year, up from 5.7 per cent in 2008.
David Ng Ka-chun, head of China and Hong Kong research at Macquarie Capital Securities, said: "At least 20 per cent of primary market demand will be cut directly by the higher tax."