‘Crisis in the making’: Housing report says Hong Kong stamp duty damages second-hand market
Study, released just before Chief Executive Carrie Lam’s maiden policy address, urges action to make the housing market more friendly for first-time buyers
An academic study endorsed by the Real Estate Developers Association has suggested that the government relaxes property stamp duty to revive the second-hand property market, a day before Hong Kong’s leader was due to deliver her maiden policy address.
But others worry that such a move would encourage property speculation, leading to more acute market inflation.
The report by economics professor Ho Lok-sang, dean of business of Chu Hai College of Higher Education, was released on Tuesday by the association, ahead of Chief Executive Carrie Lam Cheng Yuet-ngor’s policy address on Wednesday.
The study said the stamp duty arrangement had failed in its purpose to cool the market and restricted supply in the second-hand market.
“With first-time buyers now largely bypassing the second-hand market, because there is very little supply in that market, a crisis is in the making,” Ho said in the report. “Entry level homes are getting pricier and smaller.
“ … the government may be seen to be benefiting the big developers, wittingly or unwittingly.”
The government introduced an enhanced special stamp duty in 2012, requiring those who sell a property within three years after purchase to pay between 5 to 20 per cent of the sale price.
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In 2013, the government imposed a 15 per cent stamp duty on any second or more properties bought.
Ho argued that property owners who would have sold their homes to buy a bigger one would now choose to hold on to their properties, so entry-level buyers had now lost the chance to buy in the second-hand market.
He cited official figures, which showed that the prices of flats less than 430 sq ft started to increase faster than those of bigger flats between 2012 and 2013.
Ho suggested that the government exempts the special stamp duty on buyers who resell their own homes, no matter how briefly they hold the properties.
He also recommended the government to exempt the 15 per cent tax on those who had publicly declared the number of properties they had been holding and would maintain that number no matter how many times they had traded.
A spokeswoman for the association said it agreed with Ho’s analysis and suggestions and would “engage the government as soon as possible”.
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But Lawrence Poon Wing-cheung, a housing expert at City University, said it would be difficult to verify whether the properties are people’s own homes, and it was rare for homeowners to switch homes within a three-year span.
He added that many speculators in the past would also not hold more than a specific number of properties, and would “flip” them frequently to make quick profits.
“The bottom line is, does society have the consensus to support speculation?” Poon said.
Democratic Party legislator James To Kun-sun, who submitted legislative amendments in July in a bid to ramp up second-hand home supply, questioned the motives of the proposed measures.
With no signs of the property market cooling down, he said he did not see the point of easing special stamp duty for investors.
“There is an impression in society that the market is overheating. Is this the right time to retract the [special stamp duty]?” he asked.
Additional reporting Raymond Yeung