Cooling period
The government's curbs on property sales will restrain prices, but not by much.
The events of 2012 are expected to have a significant bearing on the future direction of Hong Kong's property market.
Prices reached dizzying heights, prompting the government to intervene in October, and more measures to rein in the market have not been ruled out. There has been talk of introducing a capital gains tax - on top of the two new punitive measures introduced in October - if the market does not cool down. Then there's the planned increase in the supply of homes, while suppressing demand.
Chief Executive Leung Chun-ying's administration is taking an aggressive - some say dangerous - role in trying to stabilise the market by curbing the ability of foreign buyers, particularly wealthy mainlanders, and companies from acquiring homes.
In October, the government slapped a 15 per cent Buyer's Stamp Duty (BSD) on non-permanent residents and companies wanting to acquire properties. It also raised by five percentage points a special stamp duty on sellers, introduced two years ago, to curb speculation, and extended its effect on resales to three years. The rates now range from 10 to 20 per cent.
"With these two measures, I think property prices will not rise in the coming few months, and prices may fall. However, the level of decline will not be big, because there is not enough supply. So the market will be more stable in the next few months," says Michael Choi Ngai-min, a member of the government's Long-Term Housing Strategy Steering Committee, and a member of the Housing Authority.
He notes that the annual supply of private sector homes was about 25,000 units from 1991 to 2006, but the figure fell to just 9,800 units from 2007 to 2011. "The shortage of supply is a key reason for the rising property prices and rents," Choi says.