HK home sales pre­dicted to fall af­ter stamp duty change

China Daily (USA) - - BUSINESS - By OSWALD CHAN in Hong Kong oswald@chi­nadai­

The Hong Kong govern­ment’s sur­prise move to cool the world’s least af­ford­able home mar­ket is set to spur an im­me­di­ate plunge in prices and­trans­ac­tions as buy­er­sand sell­ers hit the pause but­ton. A new stamp duty is ex­pected to trig­ger a new round of price falls that will con­tinue un­til late 2017 at ear­li­est. Share prices of de­vel­op­ers slumped in Mon­day trad­ing.

The tax of 15 per­cent will be levied on all res­i­den­tial pur­chases — ex­cept for first-time buy­ers who are per­ma­nent res­i­dents. Un­til now, the high­est levy for res­i­dents was 8.5 per­cent, while for­eigner buy­ers al­ready paid a 15 per­centstamp duty. The changes mean for­eign buy­ers will now pay an ef­fec­tive30per­centstam­p­duty.

On Nov 5 and 6, the first week­end af­ter the Nov 4 an­nounce­ment, sec­ondary home trans­ac­tions de­creased. Hong Kong ma­jor real es­tate bro­ker Cen­taline Prop­erty Agency recorded seven sec­ondary home trans­ac­tions for its 10 ma­jor res­i­den­tial es­tates, the same as in the week­end of Oct 29 and 30. Mid­land Re­alty fa­cil­i­tated eight trans­ac­tions in the same pe­riod, one trans­ac­tion less than on the week­end of Oct 29 and 30.

Louis Chan Wing Kit, chief ex­ec­u­tive of the res­i­den­tial unit of Cen­taline Prop­erty Agency Ltd, sees trans­ac­tion vol­umes plung­ing by 60 per­cent to 70 per­cent in the next three­months, and­now­ex­pects a 5 per­cent to 8 per­cent drop in prices, af­ter pre­vi­ously pro­ject­ing an in­crease in that range.

Ri­ca­corp Prop­er­ties, the sub­sidiary of Cen­taline Group, said trans­ac­tions will drop 30 per­cent to 40 per­cent in the next two months and prices will fall 5 per­cent.

“The ac­tion is likely to have an im­me­di­ate im­pact on the mar­ket, with turnovers and prop­erty prices ob­vi­ously pres­sured in a short pe­riod,” Ri­ca­corp Prop­er­ties Chief Ex­ec­u­tive Willy Li­uWai-ke­ung added. “Small and medi­um­sized prop­er­ties will be among the first to bear the brunt.”

“The mag­ni­tude of the stamp duty in­crease is a lit­tle sur­pris­ing,” said Alan Jin, an an­a­lyst at Mizuho Se­cu­ri­ties Asia Ltd. “It is the tough­est stam­p­du­ty­toweighon­the­sec­tor’s share prices. We es­ti­mate that trans­ac­tion vol­umes will fall by 20 to 40 per­cent, with smaller units get­ting hurt most. While the ear­lier home price surge is likely to “fade”, it is un­likely that we will see mean­ing­ful de­cline in short term as both buy­ers and sell­ers need­time­to­gaugeth­eim­pact.”

the per­cent­age of tax that will be levied on all res­i­den­tial pur­chases, ex­cept for first-time buy­ers who are per­ma­nent res­i­dents

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