Hong Kong homebuyers warned 'don't rush into the market - it's heating up'
The city's finance chief has warned prospective homebuyers to be aware of the market risks amid signs the lower end of the housing market is picking up.
Financial Secretary John Tsang Chun-wah said there were indications the market was "heating up", especially for low-cost homes - those in the region of HK$4 million. He was worried about buyers rushing in without considering long-term affordability and a potential rise in interest rates.
"I am particularly concerned about the buyers in this [low-cost] market," Tsang wrote in his weekly blog posting yesterday. "Once [the trend] in the property market starts to reverse, the ability of buyers to withstand [the impact] is generally quite weak."
Tsang urged homebuyers to keep an eye on prices and interest rates - and consider their own ability to buy - before they made the decision to enter the market.
His remarks came just days after lawmakers passed a bill to double the stamp duty on property purchases of HK$2 million or more, up to a ceiling of 8.5 per cent. Buyers have been paying the duty since February last year.
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Midland Holdings managing director Pierre Wong Tsz-wa said government cooling measures had raised transaction costs and the supply of low-cost homes had halved recently.
"But demand, most of which is coming from younger buyers in the first-time buyer market, usually doesn't fall in the summertime," Wong said. "Most have never bought a flat before and are entering the market, sometimes with the help of parents."
Tsang said seeing the stamp duty bill pass just before the Legislative Council summer recess had "taken a load off his mind". "The double stamp duty has effectively controlled property market risk … it has wide public recognition and, in Legco, bipartisan support," he said.
But Tsang said he opposed an amendment to the bill which was passed by lawmakers. It exempts from the double stamp duty public housing tenants who are not permanent residents and want to buy the flat they live in under the Tenants Purchase Scheme.
"The government does not agree with the amendment in principle as it only involves a few dozen non-permanent residents," Tsang wrote.
Democratic Party lawmaker Wu Chi-wai, who put forward the amendment, said double stamp duty would have a "huge impact" on these buyers.