Government measures take steam out of luxury property sector

PUBLISHED : Thursday, 27 June, 2013, 3:53pm
UPDATED : Thursday, 27 June, 2013, 3:53pm

Government measures to curb runaway growth in Hong Kong property prices appear to be biting, particularly at the top end for luxury homes worth more than HK$10 million, according to Ricacorp Properties.

In the first half, luxury home sales have plunged to a four-year low to below 3,000 deals.

Ricacorp Properties, a subsidiary of Centaline Properties, the city’s dominant property agency, estimated that there were 2,795 residential transactions for the first six months this year.

The previous low was 2,628 in the first half of 2009, when the city’s property prices were reeling under the impact of the global financial crisis.

However, property prices have surged in recent years, benefiting from record low interest rates and from a 4 trillion yuan (HK$5.0 billion) stimulus package in China, which diverted hot cash into the city’s luxury property market.

The Hong Kong government has introduced a series of measures to cool the sector.

It brought in a 15 per cent additional tax levied on property purchases by corporate and non-permanent-resident buyers - known as the buyer’s stamp duty - and doubled the stamp duty levied on all sales of flats and non-residential property worth over HK$2 million. The measures are expected to remain in place this year, keeping a firm lid on investment demand.

“The move has scared away mainland buyers and investors,” said Tommy Chow Chi-kwok, a sales director at Ricacorp Properties, adding that the higher tax has had an impact on the luxury home sector.

Chow forecast prices for luxury homes could drop by 10 per cent this year.

Separately, a recent report by Knight Frank showed that mainlanders accounted for 10 per cent of sales of high-end homes worth HK$12 million or more in the first quarter of this year - the lowest level since the first quarter of 2007. They bought more than 40 per cent of luxury homes in the first quarter of 2011.