15 per cent stamp duty
To rein in the city's runaway housing prices, Hong Kong's Financial Secretary John Tsang Chun-wah announced an additional 15 per cent stamp duty on non-permanent-resident and corporate buyers starting from October 27, 2012. The move prompted speculation over the effectiveness of taxation on the real estate market and criticisms that Hong Kong was turning away from its roots as a free market economy in favour of a more protectionist market environment.
Investors rush for office space as stamp duties cool market
Brokers expect commercial property prices to rise in face of residential stamp duties, but government may intervene there, too
Property agents say they expect investors to retreat from the housing market as a result of the stamp duties announced on Friday, and move into an already sizzling commercial sector.
But the government may be willing to block that avenue as well.
"The government's latest round of cooling measures will speed up investment in non-residential properties. Owners of office space in Kowloon East have already raised their asking prices by 15 per cent," said Choi Ming-chor, deputy sales director at Centaline's Commercial, Industrial and Shops unit.
Financial Secretary John Tsang Chun-wah said in Beijing that he would keep a close watch on the new measures, adding they might apply to commercial units if needed. Asked if the government would raise the stamp duty again, he replied: "We will review the measure, but we haven't set any review period."
Analysts expect the government to impose a mortgage tax and capital gains tax if the measures fail to stabilise home prices.
Commercial property in the city has been heating up for some time. Two weeks before the new measures, Hebei Iron & Steel (Hong Kong) International Trade Company paid HK$28,160 per square foot, or HK$386.3 million, for a property in Queen's Road Central. That broke a record for office space - HK$27,550 per sq ft at Bank of America Tower, Admiralty - set days earlier.
Choi expects to see more record deals in the office market in view of the city's "limited investment alternatives". He said a 1,812 sq ft office unit sold for HK$7,148 per sq ft, or HK$12.95 million, at Chevalier Commercial Centre in Kowloon Bay, making it the most expensive in the building at the weekend, right after the measures were announced.
Choi said the office market was dominated by local investors as mainland buyers were mostly buying residential property.
"Mainland buyers account for about 3 to 5 per cent of total transactions in the commercial property market," he said.
The market for parking space has also moved into high gear. "Car parks have changed hands briskly in Tseung Kwan O after the cooling measures," said Michael Siu Wai-hong, senior sales manager at Midland Realty's Tseung Kwan O branch.
The number of transactions for parking spaces in Tseung Kwan O jumped to 10 over the weekend, from three the previous week, he said. One changed hands at Ocean Shores for HK$1.06 million, a record for the estate. The seller had bought it for HK$310,000 in March 2004.
Demand has surged for industrial properties too, with prices up 20 per cent since mid-September, according to Alvan Chan of Midland IC&I.
The trend is expected to intensify after the government on Friday announced a 15 per cent additional stamp duty on residential property for corporate and non-permanent-resident buyers. It also raised the "special stamp duty" by 5 percentage points to 10 to 20 per cent. The special duty, earlier at 5 to 15 per cent of the price of the property and payable if resold within two years, will now take effect if resold within three years.
Centaline Property, meanwhile, lowered by 10 per cent its valuation of two sites coming up for sale in Tseung Kwan O and Ma On Shan, to HK$2.37 billion and HK$2.53 billion respectively. Tenders for the two close Friday.