The government slapped additional stamp duty on property speculation yesterday in a desperate move to rein in rampant home-price inflation. The monetary authority lowered the mortgage ratio for costlier flats. Properties purchased from today onwards and sold within six months will incur a 15 per cent stamp duty. This is in addition to the current stamp duty, capped at 4.25 per cent. The new levy will come down to 10 per cent for transactions between six and 12 months after purchase. It will be levied at a rate of 5 per cent on sales after that, Financial Secretary John Tsang Chun-wah announced. 'The seller and the buyer are jointly liable for paying the special stamp duty,' Tsang said. The new levy will only affect properties bought from today onwards. At the same time, the Hong Kong Monetary Authority reduced the amount banks could lend to buyers of homes worth HK$12 million or more from 60 per cent to 50 per cent of the price. The maximum mortgage ratio for properties priced between HK$8 million and HK$12 million was cut from 70 to 60 per cent. It remains unchanged, at 70 per cent, for less expensive homes - which are generally bought by end-users. The government's move had been widely expected amid concerns about surging property prices, but the measures announced were more severe than the market anticipated. 'It's the first time I have seen the sales office so quiet,' an agent for a Cheung Kong development in Tai Wai that went on sale hours after the announcement said. He said the number of potential buyers showing up at the sales office was 70 per cent less than for previous sales there. About 20 per cent of the 200 units sold yesterday were bought by mainlanders. The new measures are among the most drastic to be announced by the government in its fight against rampant short-term property speculation. The International Monetary Fund had earlier warned that asset inflation might derail Hong Kong's economy. The authorities are also worried about the possible inflow of more foreign capital as a result of a new round of US fiscal stimulus. 'The unusual surge in flat prices has attracted speculators. This, coupled with [US] quantitative easing measures, has distorted the market expectation regarding inflation and asset prices,' Tsang said. 'Unscrupulous speculators may take advantage of the heated market sentiments to lure people into buying beyond their means.' The new measures increase sharply the transaction costs for those 'flipping' properties for short-term gain. Home prices rose 15 per cent in the first nine months of this year, according to government figures. The number of properties resold within 12 months jumped 114 per cent year-on-year in the period, showing short-term speculation was fanning the price increases. Under the new measures, a property speculator who sells a HK$30 million property bought today within the next six months will have to pay HK$4.5 million extra in stamp duty. They will also have to commit HK$3 million more as the down payment on a mortgage. The government hopes these measures will eat into potential profit margins and put a stop to short-term speculation on luxury properties. The levy still requires approval from the Legislative Council. But the government will start recording the transactions from today and decide which ones are subject to the special stamp duty. The necessary amendments will be put to Legco early next month. The new measures could be confusing for many homebuyers. For example, tax authorities will determine how long a property has been held based on the date when the buyer and seller signed the legally binding transaction agreement. But the stamp duty is liable once the two sides sign a provisional agreement. And there are exceptions. Transactions involving family members, associated companies, close relatives or properties sold to the government or related to bankruptcy will not be subject to the special stamp duty. The idea of additional stamp duty was first aired by Anthony Wu Ting-yuk, chairman of the Bauhinia Foundation Research Centre, who told the South China Morning Post early in the week that the government 'should impose a new stamp duty on flats sold within six months to a year'. The introduction of the special stamp duty is a reflection of the limitations on what the government can do to curb rising property prices. Many effective measures, such as an interest rate hike, are not available because the Hong Kong dollar is linked to the US dollar. The link ties the local economy to the fortunes of the US economy. Cooling measures Previous restrictions introduced by the government this year February 24: Stamp duty on transactions over HK$20 million increased from 3.75 per cent to 4.25 per cent. Deferred payments stopped. More sites on the Land Application List to be made available. August 13 Sales of uncompleted flats banned. Buyers to forfeit 10 per cent of the transaction price if they pull out of a sale. More sites to be made available for building flats. Maximum loan-to-value ratio for residential units over HK$12 million lowered to 60 per cent. Banks to carry out more stringent stress tests on mortgage applicants. October 13 Land to be made available for building 20,000 private flats annually over the next decade. Another 15,000 public housing flats will be built each year. Launch of the 'My Home Purchase Plan' - a subsidised rent-and-buy scheme aimed at helping sandwich class families. Regulations on new flat sales and saleable floor area tightened.