Help for first-time homebuyers in Hong Kong: critics hit out at proposal to waive stamp duty on flats valued below HK$6 million

A proposal to waive the stamp duty for first-time homebuyers in Hong Kong has been met with opposition as critics say it would be too difficult to execute and could send the wrong message.

The Taxation Institute of Hong Kong, a group of 3,000 professionals that studies tax policies, made the suggestion on Tuesday as part of several proposals to the government ahead of its budget on February 27.

The waiver, which would alleviate the financial burden on first-time homebuyers, would only be for permanent residents buying their first flat valued below HK$6 million (US$764,500).

Should buyers resell the property within three years, they would have to pay back the initial amount waived, including an additional special stamp duty for reselling in a short period of time.

However, critics said that it was not the time to introduce a measure when the property market had already cooled.

“Any government action to introduce cooling measures now could send the wrong message to the property market. Given that the market has already seen a slight downward correction, which could continue, it has in turn already helped alleviate the burden on young people,” accountancy lawmaker Kenneth Leung Kai-cheong said on Wednesday.

“Now is not the time to adjust any stamp duties, but we can look at it next year depending on the situation,” he added.

Hong Kong home prices dropped about 9 per cent from their peak in July last year to December, according to data released by the Rating and Valuation Department. For the whole of 2018, home prices grew 1.6 per cent, though the increase was the smallest annual growth in 10 years.

Chinese University economist Terence Chong Tai-leung agreed that the move was unnecessary, citing difficulties in executing it.

“In principle, it isn’t a problem wanting to help young people. But once you have a line to draw, people will ask why not HK$6.5 million, why not HK$7 million? There’s bound to be opposition over where to draw the line, and there will be too many technical difficulties,” Chong said.

Currently, any permanent residents who do not own any residential properties at the time they buy a flat have to pay an ad valorem stamp duty.

For example, a buyer will have to pay HK$180,000 in duties on a HK$6 million flat.

Other than the ad valorem stamp duty, there are other stamp duties in place to prevent speculators from reselling flats in a short period of time.

Chong said the stamp duty was not a major consideration for aspiring homeowners, and the government should use its resources to help low-income families who were renting or living in subdivided flats rather than those who had the means to buy homes.