Hong Kong's new cooling measures
November 22, 2010 - Hong Kong
Following over fifty per cent growth in home values since the beginning of 2009, Hong Kong has imposed additional taxes and raised down-payments from November 19 to curb prices that have surged to a 13-year high and brought on warnings from the IMF that asset inflation may derail the city's economy.
Homes sold within six months of purchase incur a 15 percent stamp duty from Nov. 20, Properties resold within 6 months to 12 months will incur a 10 percent stamp duty and those resold from 12 months to 24 months will be charged 5 percent. The levy will be split between buyers and sellers.
Down payments will also rise to 50 percent for properties costing HK$12 million or more, and to 40 percent for those between HK$8 million and HK$12 million. The maximum loan to value for non owner-occupied residential properties will be lowered to 50 percent.
The measures will likely have the biggest and most lasting impact on property prices seen to date," Donna Kwok, a Hong Kong-based economist at HSBC Holdings Plc, said in a report quoted by Bloomberg.
"Hong Kong has jumped onto the bandwagon of Asian central banks and is erecting its own defenses to fend off the flood" of capital from U.S. easing.
The impact of the measures has been immediate, but many say that whilst deterring short-term speculators, they account for less than 5 per cent of total home sales in the market.
The Hang Seng Property Index, which tracks the city's seven-biggest builders, has declined 7.6 percent since this year's peak on Nov. 8.
The number of transactions at some of Hong Kong's biggest private housing estates fell to 10 on Nov. 20 and 21, Centaline, the city's biggest privately held real-estate broker, said in a statement yesterday.
There were 59 deals the previous weekend. Transactions were expected to drop 10 to 20 per cent and prices to fall 5 per cent.
In Centaline's housing estates, the number of appointments for viewings at the estate used by real-estate agents as a barometer of sentiment dropped by about 30 percent from last week, according to Bloomberg.
With most buyers expecting the measures to cause a drop in prices, many are holding off on purchases.
Hong Kong house prices grew at the third-fastest pace in Asia in the second quarter from a year earlier, behind Singapore and China, according to research by London-based real-estate consultant Knight Frank LLP.
Following the measures, "We expect transactions in November will drop by as much as a third and prices will very likely stay flat," Bloomberg quoted Buggle Lau, chief analyst at Midland Holdings Ltd., Hong Kong's biggest publicly traded real-estate agency as saying.
Hong Kong Mortgage Corp., a government-backed home-loan insurer, will introduce a cap of HK$6.8 million on the value of properties it covers, it said in a statement Nov. 19.
Fearing a bubble burst the IMF has urged further measures to rein in prices.
The government this year has also stopped offering residency to foreigners who buy property in the city and pledged to increase land supply to curb prices, which surpassed a 1997 peak on the back of record-low mortgage rates and an influx of buyers from China.
In April, Hong Kong raised the tax on homes selling for more than HK$20 million to 4.25 percent from 3.75 percent.
Sentiments within the market remain positive however with most buyers expecting to hold off until prices drop further on the back of the new measures.
Source: Propery Report
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