Hong Kong unveils more cooling measures

The territory’s government yesterday announced comprehensive curbs in an attempt to arrest the exuberance in the property market that it warned could destabilise its economy.

The measures come a month after Singapore unveiled wide-ranging measures to cool property prices.

Beginning today, Hong Kong will double the stamp duty to as high as 8.5 per cent of the property value for certain transactions, unless the buyers are first-time homeowners and are permanent residents of the city.

The new stamp duty will also be applied to all property transactions, instead of just residential ones as was previously the case. Meanwhile, the loan-to-value ratio for commercial properties will be lowered by 10 percentage points for all borrowers, down to 40 per cent for locals and 30 per cent for non-local buyers, respectively.

Financial Secretary John Tsang told a news conference: “We think that the market is very exuberant right now. We want people to really step back and think about what they are doing before they go into the market.”

Hong Kong’s housing market has boomed in recent years, with prices ballooning 120 per cent since 2008, fuelled by rock-bottom interest rates as well as strong demand from mainland Chinese buyers seeking to park their assets in the Special Administrative Region (SAR).

Mr Tsang noted that prices continued to rise by 2 per cent last month. Many expect property investment sentiment to remain robust as long as the United States Federal Reserve keeps interest rates low. Hong Kong’s currency peg with the US dollar ensures that the city’s monetary policy moves in lockstep with that of the US.

Since 2009, Hong Kong has imposed round after round of measures to cool the market and deter speculation, as it faced stubbornly high property prices as Singapore had. The SAR imposed extra duties for properties resold within a short period of time and raised down payment requirements to as high as 50 per cent.

Last October, Hong Kong levied a 15 per cent tax on property purchases made by foreigners, a measure that was later matched by Singapore, when the Additional Buyer’s Stamp Duty was raised to 15 per cent last month for foreign and corporate buyers.

After Hong Kong slapped new taxes on foreign ownership in the residential sector last October, investors began pouring cash into everything from parking spaces to hotel rooms. In the last quarter of 2012, the number of purchases by buyers investing in individual units of industrial buildings leapt to their highest level since 1999.

On Thursday, Hong Kong Monetary Authority Chief Norman Chan warned that the overheating property market posed the greatest risk to economic stability, as surging property prices could lead to an abrupt correction.

Yesterday, he raised the spectre of another property crash similar to that the city experienced during the Asian Financial Crisis. “Hong Kong is facing risks no lesser than those experienced during 1997,” he warned.

Source : Today – 23 Feb 2013

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