Hong Kong struggles to cool market
 

Hong Kong struggles to cool market

Sunday, November 21, 2010. Catherine Deshayes @themovechannel

Whilst some countries are witnessing falling property prices and an ever-increasing gap between asking and selling prices, Hong Kong is at the other end of the spectrum and introducing desperate measures in a bid to cool its red hot housing market, amid fears of a real estate bubble...

 

Whilst some countries are witnessing falling property prices and an ever-increasing gap between asking and selling prices, Hong Kong is at the other end of the spectrum and introducing desperate measures in a bid to cool its red hot housing market, amid fears of a real estate bubble...

The International Monetary Fund has turned up the heat on Hong Kong's property market, urging the government to take control of the spiralling prices as they spread from high-end pads to the general market.

According to government data, Hong Kong prices recently climbed higher than they were in 1997, increasing by 20 per cent in the last year alone.

The sky-high prices are expected to cause a bubble within the property market if they are not reined in soon and public anger is spinning out of control as more prospective buyers are priced out of the market. Hong Kong's population of seven million is crammed into a city well known for its supersonic rents and, as more buyers from mainland China file in, eager to invest in a ‘safe' market, prices zoom ever higher.

Financial Secretary John Tsang has unveiled the Hong Kong government's latest efforts to pour cold water on the market, including a ‘sliding scale' of new stamp duties which are aimed at calming the ‘short-term speculative' buyers. A levy of 15 per cent would hit anyone reselling a property within six months of buying it, with 10 per cent levied on those selling between six and 12 months.

Tsang said, "As a result of global financial conditions, the local property market has become increasingly exuberant of late. These are extraordinary measures under exceptional circumstances. Our aim is to curb short-term speculative activities and to reduce the risk of any asset bubble."

Other restraints placed on the market include limits on mortgage lending, which have been rolled out with immediate effect. These latest moves follow other attempts to cool the market earlier this year including hiking stamp duty on high-end properties by half a percentage point to 4.25 per cent. In October, the government announced it was restricting immigration to Hong Kong based on property investments and promised to provide land to allow for the building of 20,000 private residential units each year over the next decade.

Marcos Chan, head of research at Jones Lang LaSalle, said, "Hong Kong's latest moves are quite lethal and will definitely curb short-term speculative activities."

Picture by joanho


Author - Dan Johnson

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