Hong Kong developers’ shares plunge after government’s surprise cooling measure

Hong Kong developers’ share prices plunged on Monday after the government announced the highest stamp duty yet on property transactions in the city.

Analysts said the new tightening came as a big surprise and they expect home prices to face severe cooling pressure.

Cheung Kong Property Holdings slumped 8.8 per cent, Sun Hung Kai Properties fell 9.8 per cent, New World Development dropped 9.3 per cent while Henderson Land declined by 5.9 per cent at the close of trading on Monday. The city’s benchmark Hang Seng Index was up 0.7 per cent.

The Hong Kong government raised the stamp duty on all residential transactions to 15 per cent, from the previous range of 1.5 to 8.5 per cent, effective from November 5. First-time home buyers with permanent Hong Kong identity cards are excluded.

Counting previous curbs, the total transaction cost for non-locals buying a property now equals up to 30 per cent of the total consideration.

The increase in stamp duty to 15 per cent was “unexpected”, JP Morgan analysts wrote in a note. “This is likely to hurt sentiment significantly, causing a sharp drop in transaction volume for both the primary and secondary markets,” they said.