Hong Kong’s property market is facing fresh controversy in the aftermath of the government’s new stamp duty aimed at curbing speculation.
After a series of aggressive analyst forecasts for property prices in the next two years, it appeared as if the government was spurred into action. But it seems to have pleased no one with its 15 per cent stamp duty on all properties bought and sold within six months.
Brokerage CLSA describes the measures as “over the top” and expects them to reduce liquidity and increase volatility in the property market.
At the same time, an executive at one of Hong Kong’s largest property developers further stoked the controversy by unwittingly revealing the dynamics of local property as insiders see it.
Cheung Kong Holdings director William Kwok commented on Sina Weibo, a Chinese version of Twitter, that its newest development at Festival City II would not be affected by the new government measures. This claim led to a complaint that he was misleading the public.
Some of his additional comments were possibly more revealing about Hong Kong’s property market.
“Quick, quick, quick … The world of speculation is welcoming you. If Hong Kong people do not buy, those rich people from the mainland should buy,” he said before adding, “Merely by the appreciation of yuan, one can make big money. Hong Kong’s real estate prices can soar by 40 per cent in the future.”
The comments prompted calls for an investigation by legislators, while the government has asked the Real Estate Developers Association (REDA) to examine the issue. If these remarks are construed to contain price-sensitive information, Hong Kong’s Securities and Futures Commission may also have reason to take a look at the matter.
Perhaps by putting the comments on the Web, it could be argued the comments were being made public, rather than selectively disclosed.
Still, the main complaint is that these remarks could mislead buyers into believing that the real estate flagship of Asian tycoon Li Ka-shing somehow had immunity to the government’s anti-speculation measures.
The Sina Weibo comments are also telling in other ways. That is, these latest taxes fortuitously miss the real causes of price increases, namely the growing influence of mainland buyers in Hong Kong property, which by some estimates accounted for up to 35 per cent of all new purchases this year and the government’s insistence on sticking with the Hong Kong dollar peg.
Sandwiched between the US dollar and the upward pressure on the yuan, Hong Kong assets are being squeezed higher and appear a one-way bet for mainlanders.
The obvious policy response from the government would be to actively increase supply or try to instil greater competition in an oligopolistic market. CLSA analysts note that the latest measures “do not address the more fundamental need in Hong Kong to increase supply of residential property.”
The suspicion must be that the government went for a policy that sounded tough but is expected to have little real impact. If its intention is not to deal with new supply, overseas buyers from the mainland, or the inflationary consequences of the currency peg, little will change.
The question then is this: Do you listen to Cheung Kong executives or to the government, which says it wants to act tough to curb an overheating property market?
Another thing Mr Kwok’s choice of language reveals is that buying a home in Hong Kong is clearly a very speculative activity and should probably come with a safety warning. Surely the market is crying out for formal regulation over what is many people’s biggest investment decision in their lives.
Perhaps property stocks rather than the physical market would be a better bet. Hong Kong’s stock market is at least better-regulated and more transparent.
Source : Today – 3 Dec 2010