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HONG Kong imposed additional taxes and raised down
payments on residential properties, stepping up a battle against surging
prices after the International Monetary Fund (IMF) warned that asset
inflation may derail the city's economy.
Homes sold within six months of purchase will incur a 15 per cent
stamp duty from today, Financial Secretary John Tsang said in a briefing
yesterday. Down payments for homes costing HK$12 million (S$2 million)
or more will rise to 50 per cent, from 40 per cent. A stock gauge of
developers in Hong Kong fell for the eighth day in nine ahead of the
announcements.
'The measures show the government is serious about curbing
speculation, and that would impact on market sentiment, leading to a
fall in home sales volume,' said David Ng, a Hong Kong-based property
analyst at Royal Bank of Scotland plc. 'Home prices won't see a decline
immediately as speculators could still keep their stocks in the low
interest rate environment.'
Governments
from South Korea to Brazil are acting to stem fund inflows into their
higher- yielding markets after the US Federal Reserve's expanded
monetary stimulus. Hong Kong is resorting to increased taxes and tighter
lending to curb home prices that have risen more than 50 per cent since
the beginning of 2009 because the island's currency peg to the US
dollar prevents the city's de facto central bank from raising interest
rates.
'The unusual surge in flat prices has attracted speculators - this,
coupled with quantitative easing measures, has distorted the market
expectation regarding inflation and asset prices,' Mr Tsang said. 'The
government is resolute in maintaining economic stability and curbing any
threat to people's livelihoods.'
The Hang Seng Property Index, which tracks the city's seven-biggest
builders, fell 1.3 per cent at the 4pm local time close to the lowest
since Oct 29. It has declined 7.6 per cent since this year's peak on Nov
8. It ended the week 4.1 per cent lower, its biggest weekly drop since
the five days ended May 7.
Properties resold within 6-12 months will incur a 10 per cent stamp
duty, while those resold from 12-24 months will be charged 5 per cent,
Mr Tsang said yesterday. The stamp duty will be split between buyers and
sellers, he said.
Down payments for homes costing HK$8-12 million will be increased to
40 per cent from 30 per cent, Hong Kong Monetary Authority chief
executive Norman Chan said at a separate briefing yesterday. Mr Chan has
said that the Fed's quantitative easing may spur inflows of cash into
Hong Kong.
The maximum loan to value for all non-owner occupied residential
properties and those held by companies will be lowered to 50 per cent,
Mr Chan said.
The government will adopt more measures to make sure that the market
is stable, Mr Tsang said. The additional stamp duty 'is quite
substantial, and is a way to deter speculation', said Benedict Ma, Hong
Kong-based associate director of research at CB Richard Ellis Group Inc,
the world's biggest real estate services firm. 'Investors, especially
those in the luxury market, will have to reassess whether this is really
the right time to get into the market.'
The IMF said in a report on Thursday that Hong Kong's accelerating
asset inflation risks causing a bust that leads to deflation and an
extended economic 'downturn', and urged further measures to rein in
prices. The city has in the past year raised down payment ratios and
boosted land supply to curb home prices, which have surpassed a 1997
peak on the back of record low mortgage rates and an influx of mainland
Chinese buyers.
In April, Hong Kong raised the tax on homes selling for more than HK$20 million to 4.25 per cent from 3.75 per cent.
This article was first published in The Business Times. | 
