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.
Expats in Hong Kong say property measures discriminate against them
Foreigners living and working in Home Kong, who are not permanent residents, say new property measures discriminate against them
Disgruntled expatriates living and working in Hong Kong believe they have become collateral victims of government measures aimed at curbing demand for property from mainland buyers.
"It has basically kicked us off the property ladder," said Chris Lane. "They are discriminating against all the people who live and work here, and want to buy their own home and don't want to rent," said Lane, a California-born property agent who specialises in selling overseas properties to Hongkongers.
He is a keen property investor himself. He and his wife, Karen, have a two-year-old daughter, Bailyanna, and have been looking for bigger space in the city.
An American hedge fund manager said: "It seems they are following the Singapore model, which is not a good model." The fund manager owns a property he is worried that he cannot sell because he can't get as attractive a mortgage on his next purchase.
"It seems like such a bad policy when you're trying to attract wealth and wealthy people to live and bank in your city. This is a slap in the face," he said.
Some investors see it as outright discrimination, something Hong Kong has not resorted to in the past.
"It's not a good situation to be in if you're a foreigner," said Danny Lim, an Indonesian-born, Australian-raised investor who runs the property fund manager The Creations Group.
"I think they should repeal the measure or apply it across the board. It doesn't seem fair. It's going to have unintended effects, for expats and so forth."
An Australian pilot based in Hong Kong says he and his wife, who were about to settle on a property just before the new stamp duty was introduced, have been talking about returning to Australia because they can't get on the property ladder here. Neither are permanent residents.
The target of the expatriate ire is a special additional stamp duty of 15 per cent on purchases by corporate and non-permanent-resident buyers. The tax was among measures announced on October 29 and was widely understood to target mainland buyers who were blamed for putting Hong Kong home prices beyond the reach of a growing number of local buyers.
The government also raised by 5 percentage points a special stamp duty on sellers that was introduced two years ago to curb speculation, and extended its effect on resales from two to three years. The rates now range from 10 to 20 per cent.
The expat pilot said he felt that any advantage to be gained by coming to work in Hong Kong was gone, and the government needed to understand that if it wanted to attract top professionals such as pilots, investment bankers, hedge-fund managers, accountants and lawyers, it should ensure they did not feel they were outcasts and discriminated against by official policy.
"Hong Kong is slowly becoming a mainland city. Expats are going to become a minority in terms of attention," he warned.
Naomi Reidy, an agent who works for Nest Property in Hollywood Road, said she had seen a drastic decline in expat interest since the October 29 measures. "People have just dropped off the face of the market," she said. "With the special stamp duty you've got to have HK$3 million just to buy a shoebox."
Another consequence that the government had not likely considered, brokers say, is that rents have shot up because a certain portion of the buying population have been forced to continue to lease.
A 700 sq ft, single-floor apartment in Sai Kung, a popular getaway, used to go for HK$10,000 a month two or three years ago, Reidy said. Now a duplex in the same area starts at HK$35,000, and landlords will not budge on the price.
"I think something has to give," Reidy said. "I don't think the government should be encouraged to make another decision like that one. It came out of the blue. It knocks you for six."
The new rules are widely viewed as being aimed at mainland buyers, who have flooded the city with cash in a search for prestige property and who are often searching for a safe offshore haven for their money.
Although the measures may not have explicitly targeted mainland buyers, they have adversely impacted on other prospective buyers who are not permanent residents. Many agents say plenty of mainland buyers have enough cash to bring over in suitcases and buy Hong Kong property outright, putting them beyond the reach of the new rules.
Now expatriates complain that the measures will have the unintended consequence of penalising investments by professional workers in the city, and drive them away from Hong Kong. Would Hong Kong take the same kind of steps if the stock market went through the roof, they asked?
"The government is now cracking down on what used to be a free market. I think they made a drastic decision," said Lane, who is now looking to invest in property elsewhere.