Resale stamp duty fails to halt flat sales as profits keep rising

A special stamp duty intended to discourage the resale of flats within two years of purchase lost its effect after just 16 months, official statistics show.

The government brought in the levy to curb speculation and cool the property market in November 2010. The duty requires people to pay 5 to 15 per cent of a flat's price if the property is resold within two years. The longer they hold the flat, the lower the duty.

Since its introduction the number of speculative confirmor transactions - resales before a property is assigned - dropped dramatically. But resales one to two years after assignment, which initially dipped, have crept up again. They accounted for 6.3 per cent of transactions in the third quarter - only slightly below the level before stamp duty was introduced.

The government also released the latest figures for quarterly economic growth alongside the property statistics. GDP grew by 1.3 per cent year on year in the third quarter, up slightly from the 1.2 per cent growth in the second quarter. On a quarter-to-quarter basis, real GDP grew 0.6 per cent, after a decline of 0.1 per cent in the preceding quarter, due to improved external trade, thanks to stronger growth in Asia.

Inland Revenue Department figures show the number of confirmor transactions was at most 20 per month in the 16 months after the duty's introduction. But it jumped to more than 100 per month in March. Since August, that pace sped up to reach about 285 in October.

"As property prices go up, deterrence of the 5 per cent duty diminishes," government economist Helen Chan said yesterday.