HK tackles property bubble
- Published: 22/02/2013 at 06:06 PM
- Online news:
HONG KONG -- Hong Kong on Friday doubled the sales tax on properties costing more HK$2 million (7.7 mllion baht) and targeted commercial real estate for the first time as the risk of a bubble spreads from apartments to parking spaces, shops and hotels.
The stamp duty will increase to 8.5% of the purchase price for all properties, Financial Secretary John Tsang said.
The Hong Kong Monetary Authority also tightened mortgage terms for commercial properties and parking spaces, which have attracted a lot of speculative money.
The government widened its property curbs to cover commercial transactions after earlier this week hundreds of people turned up to buy hotel rooms being sold by billionaire Li Ka-shing’s Cheung Kong (Holdings) Ltd in the city, prompting a warning from the government.
Home prices have doubled in the past four years on near-record low mortgage rates, an influx of mainland Chinese buyers and a lack of new supply.
"This again shows the government’s determination to curb prices,"said Thomas Lam, head of research for Greater China at Knight Frank LLP.
"It will affect the luxury residential sector and also investors of buildings and commercial properties. This will add a lot to their purchasing cost."
The value of retail shop transactions rose 78% from a year earlier to HK$85 billion in 2012, as curbs on home prices prompted investors to seek other properties, according to Centaline Property Agency Ltd, the city’s biggest closely held real estate company. That's the highest since at least 1996, when the realtor began collecting data.
Hong Kong’s curbs come after Singapore introduced new measures last month that included an increase in the stamp duty for homebuyers by between five and seven percentage points and a stamp duty for sellers of industrial buildings, starting at 15% if the property is sold within a year.
Under the new rules, Hong Kong property deals below HK$2 million will incur stamp duty of 1.5% of the purchase price, from HK$100. The tax for those over HK$2 million will be raised to as much as 8.5% from 4.25%, Tsang said.
The measures take effect on Saturday but local permanent residents who don't own homes will be exempted.
Buyers of non-residential properties will be required to pay stamp duties when they sign the purchase agreement, he said.
Prices of offices rose 23%, while those of retail spaces advanced 39% in 2012, Tsang said.
Hong Kong has the world's highest shop rents and is the world's second-most expensive place to rent office space, property brokers, including CBRE and Cushman & Wakefield have said.
"The property market bubble risks have only increased and not decreased," Tsang said.
"If we allow the risk to continue to expand, ultimately it will affect the macroeconomic and financial system's stability. The destructive power on society will be considerably large. The price of non-residential property has also soared."
Concerns that housing is becoming unaffordable has forced Chief Executive Leung Chun-ying to introduce a raft of measures since taking over in July as the city’s leader.
Leung's government in October imposed an extra 15% tax on all home purchases by companies and non-permanent residents, adding to earlier steps including accelerating new home sale approvals and tightening banks' mortgage lending.
Hong Kong homes cost 13.5 times the gross median household income, up from 12.6 times a year ago, the most expensive housing market in an affordability survey by the US consulting company Demographia.
A reading of 5.1 or more is considered "severely unaffordable", while below 3 is seen as affordable.
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Writer: Bloomberg News