Flip-flopping policies sow confusion in Hong Kong housing market

Home seekers contemplating a property purchase probably feel confused by the government's recent housing policies, which seem to contradict each other.

At the end of last month, the government accepted the record-low winning bid from Great Eagle Holdings for a residential site in Tai Po at HK$3,300 per square foot.

The sale was seen as evidence that the government is open to settling for lower land prices as it seeks to increase housing supply. It seemed to send a signal to the market that the policy of high land prices, which had been blamed for years as a major reason for the city's lofty home prices, would not continue.

But it was too early for home seekers to celebrate. Just two weeks before the land sale signal was delivered, Secretary for Financial Services and the Treasury Chan Ka-keung announced a modification of the double stamp duty, which is part of the measures to cool the market to help residents upgrade their flats.

The concession extends the time for residents moving up the property ladder to sell their existing homes to qualify for a refund of the additional stamp duty tax.

That means they will no longer have to pay a double stamp duty of as much as 8.5 per cent if they can sell their first homes within six months of signing a formal agreement to buy the new one, rather than a provisional agreement.

Buyers of pre-sale new-build flats therefore have up to 36 months to sell their first property. Developers are allowed to sell projects as early as 30 months before completion.

Such a relaxation creates a policy inflection point that favours primary launches.

Over the past four weeks, Cheung Kong (Holdings) has sold more than 1,500 units at its 1,717-unit City Point project in Tsuen Wan. Other developers also saw strong take-up for their new launches.

In total, 506 primary units were sold over the weekend, up 18 per cent week on week. Total sales amounted to HK$6 billion, the highest weekend sales achieved over the past three years.

The improved sentiment has spilled into the second-hand market, with agents reporting more record-breaking deals of small units in different districts.

Secondary prices rebounded in the Centa-City leading index, which tracks secondary home prices at 100 estates. The index rose 0.55 per cent week on week to 119.89 on June 20, taking the year-to-date gain to 0.7 per cent.

Home seekers are now confused with the market outlook. On the one hand, the government sells cheap land to speed up flat production to regulate prices. On the other, it relaxes measures to boost market sentiment.

While external factors such as movements in the interest rates are difficult to predict, the government's flip-flopping policies have sown confusion in the market.

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