HK to cool world’s highest home prices

HOng Kong real estate

By Bloomberg

HONG Kong Chief Executive Leung Chunying is taking additional steps to cool the world’s costliest property market, where prices have rebounded after a short-lived dip.

The government raised the stamp duty to 15% for all residential purchases except for firsttime buyers who are permanent residents effective Saturday.

Until now, the highest levy for residents was 8.5%, while foreigners already pay a 15% stamp duty. Leung and some of the city’s most senior officials were present to announce the change.

“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, says in an interview. Chan says he now expects a 5% to 8% drop in prices, after projecting an increase of similar magnitude before the stamp duty increase was announced.

Mainland buyers hedging against a falling yuan and an abundance of financing have undone the government’s previous attempts to make housing more affordable.

The city has the world’s most unaffordable property market, stoking discontent about inequality and lessening its appeal to expatriates. Senior officials also voiced concern that soaring prices could threaten financial stability.

“Property risks have been increasing with the rapid surge of prices and transactions,” Financial Secretary John Tsang says. “We have to prevent the risk of property bubble from worsening, which in turn can threaten our economy and even the stability of the financial system.”

The Centaline Property CentaCity Leading Index, which tracks sales in the secondary market, has rallied 13% since reaching a low point in March amid demand from mainland Chinese buyers and locals. The index is now just 2% shy of the record it reached last September.

Some potential buyers are rushing to complete purchases before midnight, when the new levy takes effect, Centaline’s Chan says. Hong Kong benchmark Hang Seng Index futures extended losses, dropping as much 0.6% after the announcement.

Hong Kong’s resurgent property market poses a headache for Leung, who had been touting his success in curbing prices ahead of a March vote to determine the city’s leadership for the next five years.

Leung has introduced a raft of measures to cool the housing market since 2012 and his record may weigh on China’s decision whether to keep backing him.

It takes an estimated 19 years of median household income to buy a home in Hong Kong, according to Demographia, putting property outside the reach of the vast majority of citizens. Demographia last year found prices in the city the least affordable it’s measured in 11 years of surveying large urban markets.

“Not only young families can’t afford housing, but even for those who can afford, they have to live in smaller apartments because of the issue of property prices,” Leung says.

In another sign that the property market is heating up, a unit of HNA Group Co this week outbid Hong Kong developers including Cheung Kong Property Holdings Ltd with a HK$8.84bil (US$1.1bil) offer to buy land in the former Kai Tak airport area, the highest price paid at a government land sale in 3½ years.

“We all think pricing is crazy,” says Denis Ma, head of research for Hong Kong at Jones Lang LaSalle Inc, referring to prices paid at land auctions. “A lot of buyers use that as evidence that the market is going to go up.” – Bloomberg

– Malaysia Property News

Related Posts