By Oswald Chan
HONG KONG – Chief Executive Leung Chun-ying is taking additional steps to cool the world’s costliest property market – where prices have rebounded after a short-lived dip.
On Friday, the government raised stamp duty to 15 percent for all residential purchases, except for first-time homebuyers who are permanent residents, effective on Saturday.
“After all the tightening measures launched since 2012, speculative and non-resident demand for Hong Kong properties has fallen drastically,’’ Leung said in the Friday press conference.
“However, investment demand continues to dominate the local home market when home prices and transaction number rebounded drastically since the third quarter this year,” he added.
READ MORE: Housing in HK
Mainland buyers hedging against a falling yuan and an abundance of financing have undone the government’s previous attempts to make housing more affordable. It takes an estimated 19 years of median household income to buy a home in Hong Kong, according to Demographia.
Hong Kong home prices in September rebounded 2.8 percent on a monthly basis, registering the largest increase since February 2013. From March to September, local home prices have surged 8.9 percent, Secretary for Transport and Housing Anthony Cheung Bing-leung told reporters.
According to government statistics, Hong Kong home prices in September were just 3.5 percent lower than the historical peak recorded in the same period last year.
Residential home transactions also swelled to an average of 6,000 cases per month in the third quarter compared to an average of 2,100 cases per month in the first quarter. The number of home transactions conducted by second-home buyers (liable to pay Double Stamp Duty) rose to 2,600 cases in September and 2,092 cases in October, compared with average 1,000 cases earlier this year.
“If we do not launch additional measures to cool the sizzling property market to combat irrational exuberance, this may worsen and would create spillover effects on the local economy and financial system,” Financial Secretary John Tsang Chun-wah cautioned.
The government has introduced a raft of measures since 2012, including levying Buyer’s Stamp Duty, enhancing the Special Stamp Duty and introducing the Double Stamp Duty (DSD), to cool down the world’s costliest home market.
“The new measure will cool down investors’ demand for small lump-sum properties. Previously, investors would not mind pay DSD on small lump sum below HK$4 million,” said Cliff Tse Wai-hung, regional director of valuation advisory services at Jones Lang LaSalle.
“Now the flat rate at 15 percent will deter these investors as well,” he added.
Hong Kong home prices surged in September for the sixth consecutive month to hit the highest level in nearly a year, government data showed on Monday.
Soaring property prices this year are in stark contrast to the slowdown in the overall economy, as evident from flagging retail sales and slowing economic growth, and industry officials said renewed mainland purchases had been a key factor behind the rise to escape a depreciating yuan currency.
Chinese investment into Hong Kong properties perked up in recent months both in the primary and the residential market after showing sluggish growth most of last year, according to data from Midland Realty, a real estate agency.
But property analysts expect the measures to have limited impact on prices in the short term.
“Under the current new policy, in the next two months we can expect the transaction volume to drop 20 to 30 percent but this will have limited impact on property prices,” said Thomas Lam, senior director at consultancy, Knight Frank.
Another of the city’s largest property agencies, Centaline Property Agency Ltd, earlier forecast that home prices would return to peak levels in the fourth quarter this year.