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Friday, February 27, 2015, 09:28

Stamp duties reduce property speculation

By Zhou Mo in Hong Kong

Speculative activities in Hong Kong’s housing market have been significantly reduced after the government introduced several demand-side management measures to curb rising property price.

According to the latest document submitted to Legislative Council by Transport and Housing Bureau, the average monthly number of confirmor transactions — deals in which properties are resold before the original transaction is completed, resale within six months of purchase and that within six to 12 months has declined 96 percent, 99 percent and 99 percent respectively, since the Special Stamp Duty (SSD) was launched in November 2010.

SSD refers to punitive stamp duties imposed on properties which are resold or transferred within three years of purchase. The duty varies from 5 to 20 percent according to purchasing time and holding period of the property.

Resale transactions within 12 to 24 months of purchase also saw a sizeable decrease of nearly 90 percent. As of December 2014, a total of HK$770 million had been collected from SSD.

The government also introduced Buyer’s Stamp Duty (BSD) in October 2012 and Double Stamp Duty (DSD) in February 2013. By the end of last year, approximately HK$10.5 billion BSD revenue had been recorded. The number of monthly transaction involving non-permanent residents and non-local companies fell to 115 over the period, from 365 before the introduction of BSD.

BSD is a 15 percent tax levied specifically on companies and non-permanent residents who buy properties in the city. Meanwhile, DSD, which targets non-first-time buyers, is the doubling of stamp duty on property purchase valued at HK$2 million or above to 8.5 percent from previous 4.25 percent.

Financial Secretary John Tsang Chun-wah said the three stamp duties, commonly known as “3D”, has been effective in addressing Hong Kong’s housing problem.

Speaking at a press conference on Wednesday, he said he has noticed a rising trend in the city’s housing market in recent times and will closely follow its development.

“We will consider taking measures to ensure smooth development of the housing market if necessary while not affecting our financial market,” he told reporters.

John Siu, executive director at the Hong Kong office of Cushman & Wakefield, a real estate services firm, said the “3D” stamp duties have played an active role in cooling down Hong Kong’s housing market, but in the long term its effect on curbing housing price will be limited.

He predicted that the government will not abolish the three stamp duties in the near future. “Unless the city’s housing supply sees a considerable increase and property price shows a sign of decrease, the government will keep imposing the stamp duties,” Siu said.

Hong Kong’s residential property prices surged 13 percent in 2014 on a year-on-year basis, with the price index of small-and-medium-sized apartment market showing the strongest rise of 15 percent, compared with the previous year.

The government has been making efforts to increase land supply in an effort to deal with the continually rising housing price. Secretary for Development Paul Chan Mo-po announced on Thursday that 29 residential sites, four commercial/business sites and one hotel site will be sold in 2015-16, providing some 16,000 apartments, 180,000 square-meter commercial floor area and 500 hotel rooms.
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