If you’re an overseas property investor, you’d know that Hong Kong property prices are the most expensive in the world. However, one thing that was kept under wraps until recently was the Hong Kong government’s plan to cool the property market. In an effort to curb rising prices, the government announced last week that they are raising stamp duty to 15% for all residential purchases. This is the second time Hong Kong’s property stamp duty was increased in three years.
Before the announcement, the highest stamp duty for residents was 8.5%. However, first-time buyers who are permanent residents are exempted from the 15% stamp duty. For overseas property buyers, this means that they will now pay 30% stamp duty for their Hong Kong property purchase. This is double their former levy of 15%. The stamp duty, which took effect last Saturday, left potential buyers in a hurry to close deals before midnight of November 5.
Hong Kong property buyers will now face higher stamp duty
This surprising move is expected to impact the market immediately. In fact, shares of major Hong Kong developers tumbled. “Cheung Kong Property Holdings dropped 8.8% while Sun Hung Kai Properties fell 9.8%,” reports South China Morning Post. Many analysts are also foreseeing transaction volumes to dip by up to 70% in the next three months. The scenario is the same for prices, where a 5 to 8% drop is imminent.
The total increase of Hong Kong home prices from January to September of this year was 8.9%. According to Financial Secretary John Tsang, such drastic move was made in order to avoid the housing bubble from worsening. Tsang adds that this “can threaten our economy and even the stability of the financial system.” In the televised conference, Hong Kong Chief Executive Leung Chun-ying and other senior officials were present to announce the change.
Although prices of residential properties in Hong Kong are expected to drop, the magnitude of the stamp duty increase is also a deciding factor in your plans to invest in Hong Kong. If you’re a foreign buyer looking into purchasing an overseas property, stay tuned to this blog for more property news on Hong Kong market and other Asia properties.