Hong Kong’s recent stamp duty changes are weighing on sentiment surrounding property sales.
The latest market survey from the Royal Institution of Chartered Surveyors found that sales and prices expectations fell sharply in November, following the government raising stamp duty on residential purchases to 15 per cent, a notable reversal after hitting a 16-month high in October.
Over the next three months, a net balance of 33% and 5% of respondents expect sales and prices to contract, respectively. Similarly, a balance of 16% and 1% expect a drop in sales and prices over the next year. Sentiment was particularly downbeat among respondents on Hong Kong Island, where a balance of 50% and 20% expect sales and prices to decrease over the next 12 months, respectively.
Buyer enquiries were also down substantially, led by a sharp contraction in enquiries on Hong Kong Island while those in the New Territories were flat. Demand from mainland Chinese helped offset some of the fall in demand, as a majority of respondents in Kowloon and on Hong Kong Island reported an increase from these buyers, and only a slight majority in the New Territories reported a decrease.
The sentiment indicates that short term effects of the increase in stamp duty will be similar to that following past cooling measures introduced by the Hong Kong government in 2010, 2012, and 2013. Volumes and values fell sharply following the introduction of past cooling measures in both primary and secondary markets and the weakness generally persisted for three to six months.
Tighter supply, in the meantime, should provide some short term respite for prices, as a majority of contributors in all regions reported a contraction in instructions to sell.
Hong Kong hikes stamp duty for almost all property buyers
14th November 2016
Hong Kong has hiked stamp duty for almost all property buyers, in an attempt to cool house prices.
The government increased stamp duty to 15 per cent for foreign buyers several years ago, as concern grew around climbing property values. Now, following a brief price dip, values have risen once again. In response, the government has rolled that 15 per cent levy out to almost every house-hunter.
As of last week, the stamp duty rate applies to all residential purchases, except for those by first-time buyers who are permanent residents. (Previously, residents were charged a maximum of 8.5 per cent stamp duty.)
“It’s unexpected. It’s a very heavy measure and shows the government is very
determined to cool the property market,” Louis Chan, chief executive of the residential unit of Centaline Property Agency Ltd., told . Chan forecast a 5 to 8 per cent drop in prices.
The result means that foreign property investors will effectively face a 30 per cent stamp duty.
“This not only means it’s now more expensive for non-residents to buy property in the city, but also means that Chinese buyers – who long have considered Hong Kong a notable playground for them – will now be casting their eyes elsewhere in search of better deals,” suggests Juwai.com.
The Chinese portal predicts that buyers may instead look to the UK, South Korea, USA or Malaysia for investment opportunities.Google+