An aerial view of highways and high-rise buildings in Hong Kong.
HONG KONG: Hong Kong doubled the sales tax on properties costing more HK$2m ($258,000) 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 percent of the purchase price for all properties, Hong Kong Financial Secretary John Tsang said on Friday. The Hong Kong Monetary Authority also tightened mortgage terms for commercial properties and parking spaces.
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 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. “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 percent from a year earlier to HK$85bn 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 realtor. 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 home buyers by between 5 percentage points and 7 percentage points and a stamp duty for sellers of industrial buildings, starting at 15 percent if the property is sold within a year.
Under the new rules, Hong Kong property deals below HK$2m will incur stamp duty of 1.5 percent of the purchase price, from HK$100. The tax for those over HK$2m will be raised to as much as 8.5 percent from 4.25 percent, Tsang said. 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 percent, while those of retail spaces advanced 39 percent in 2012, Tsang said today.
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 Group Inc. and Cushman & Wakefield Inc, 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 percent 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.
Leung said in September he will restrict home buyers of two building sites the government plans to sell to local residents, a week after announcing a 10-point package to rein in prices, including accelerating new home sale approval and giving preference to local buyers.
“The government probably senses that property prices are still going up even after the last round of curbs,” in October, Simon Lo, Hong Kong-based head of research and consultancy at Colliers International, said in a phone interview today before the measures were announced.
Hong Kong is the world’s most expensive place to buy an apartment, according to London-based property broker Savills. 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 annual affordability survey by Belleville, Illinois-based consulting company Demographia released last month. The survey examined housing prices in Australia, Canada, Hong Kong, Ireland, New Zealand, Britain and the United States.
WP-Bloomberg
