Government right to rein in runaway property prices
Introduction of new stamp duty a much-needed measure but ultimately the solution is to boost land supply
The government has always said it would not rule out further cooling measures should the property market heat up again. With home prices soaring close to double digits in recent months, intervention is justifiable. The measures introduced by Chief Executive Leung Chun-ying and his team on Friday might have surprised many prospective buyers or even upset their plans, but they are necessary steps.
It is good that local first-time homebuyers will not be hurt by the increase in stamp duty, which was revised from the previous 4.25 per cent to 8.5 per cent depending on the value of the property, to a flat rate of 15 per cent. Those affected are mainly non-permanent residents and locals who invest in a second home. The new rate applies to residential property transactions by individuals or companies.
There have been plenty of signs of an overheated market. If the sale of a parking space for a record HK$4.8 million in Mid-Levels last month was not indicative enough, a government site at Kai Tak surely rang alarm bells last week. It was tendered at a record price of HK$13,500 per square foot, more than double that of a landmark deal in the area two years earlier. Last Friday, another site in Tai Po drew dozens of bids. According to government figures, home prices rose for the sixth consecutive month in September, bringing the accumulative growth to 8.9 per cent.
With Beijing taking the controversial step to tackle the Legislative Council oath-taking fiasco involving two newly elected lawmakers with an interpretation of the Basic Law, Friday’s announcement of the new stamp duty has inevitably fuelled the perception that officials are trying to divert public attention. Even so, it is a much-needed measure. The intervention underlines the government’s determination to rein in the runaway property market.
The government has intervened in the market several times since 2010. Obviously, the market cannot be tamed by just repeatedly targeting stamp duty. Indeed, officials were under pressure to drop or ease other measures in the past, particularly when there were signs of the market cooling down. This is likely to be the case again when prices stabilise.
The ultimate solution is to enhance land and housing supply in the long run, which hopefully will result in a gradual adjustment in prices. This requires not only strong political will and determination on the part of the government, but also community support.
