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Hong Kong stamp duty

Market for cheaper flats expected to recover faster than luxury segment

Agents are expecting most of the sales activity to focus on flats worth around HK$4 million or below as new stamp duty starts to take effect

PUBLISHED : Wednesday, 27 February, 2013, 12:00am
UPDATED : Thursday, 07 May, 2015, 12:48pm

The mass home sector is expected to return to normal faster than the luxury home segment, with activity expected to focus on flats worth HK$4 million or below, say property consultants.

The luxury market is hit by the government's move to double stamp duty for those buying second homes from Saturday.

Sales of homes worth HK$20 million or higher froze over the weekend, but demand among first-home buyers stayed healthy despite higher property tax as they took advantage of discounts.

"We have seen a handful of flat viewers come out to look for flats at or below HK$4 million," said Ken Lee, senior regional sales director at Centaline Property Agency's Tseung Kwan O branch. Under a new tax rule, stamp duty for flats between HK$3.29 million and HK$4 million rose to 4.5 per cent, from 2.25 per cent, and 6 per cent for flats between HK$4.42 million and HK$6 million. The revised stamp duty will not apply to local first-time homebuyers.

On Sunday, the branch helped a buyer purchase a 515 sq ft flat at The Metro City, in Tseung Kwan O, for HK$3.98 million, slightly lower than prevailing prices of around HK$4.2 million.

He said one of his clients, a retiree who lives in Shenzhen after selling his apartment years ago, is again looking in Hong Kong for a long-term investment.

"As he will not be affected by the extra stamp duty, he wants to buy a 500 sq ft flat for HK$4 million or below. This can fetch a monthly rental of HK$12,000," he said, adding it could yield an annual return of 3.6 per cent.

Many Wells Property Agents, which focuses on Tuen Mun, said first-time buyers accounted for 44 per cent of the branch's total sales over the weekend, while 55 per cent were upgraders who targeted flats between HK$3 million and HK$4 million.

"With the mass market to recover faster than the high-end sector, we will update the information on the availability of flats worth HK$4 million or below on our website," said senior sales manager Wilson Lam.

There were 285 three-bedroom flats valued at HK$4 million or below for sale in Tuen Mun as of February 25.

George Sze, assistant district director at Ricacorp Properties' The Peak and Island South District branch, said no transactions were recorded after the government doubled stamp duty.

"Our sales mainly focus on average transaction prices of more than HK$20 million and houses changing hands for between HK$100 million and HK$400 million. Buyers will defer their purchase decisions as they want to observe the market reaction to the new stamp duty."

Credit Suisse said in its latest report that the new measures were likely to increase transaction costs for most investors and the residential market was likely to be supported mainly by upgraders and end users.

"For the upgraders, although the increased stamp duty can be claimed if they successfully sell the existing apartment within six months, risk will remain which the upgraders might not want to take. For first-time homebuyers, the market segment probably will still be concentrated at properties at HK$6 million or below," said the report.

Data from Ricacorp Properties, which monitors sales in the city's 50 major housing estates, show that deals picked up 33 per cent to 117 last week, ending a four-week decline.

There were only 88 deals the previous week. In the primary market, 61 flats were sold over the weekend, down almost 34 per cent from 92 over the previous weekend, according to agents.

Of this, The Reach, developed by Henderson Land Development and New World Development, accounted for 33 units.