(Adds details of HKMA home loan curbs and analyst comment)
By James Pomfret and Alison Leung
HONG KONG Feb 22 Hong Kong is imposing higher
stamp duties and home loan curbs on property transactions,
officials said on Friday, the latest effort to cool an
overheated property sector that boasts some of the world's most
Financial Secretary John Tsang said "exuberance has regained
momentum" in Hong Kong's property market, and for this reason
stamp duties for flats would be increased across the board for
Tsang said the measures were needed to keep the potential
economic risk from spreading in the financial hub.
"The risk of an asset bubble is increasing. If we allow the
bubble to grow, in the end it will affect the macroeconomy and
also the stability of the financial system. It will be very
damaging to society," Tsang told reporters.
"These measures will help narrow the supply-demand gap,
contribute to the stable development of our property market and
the stability of our financial system," Tsang said.
For flats costing less than HK$2 million (about $258,000),
the stamp duty would be increased from HK$100 to 1.5 percent of
the transaction price, while the stamp duty for other properties
would be doubled to as much as 8.5 percent of the residential
The increased stamp duties, however, would not apply to Hong
Kong residents buying residential property for the first time in
the city, in a bid to allow new local homemakers to enter the
market, while other limited exemptions were possible.
The government also said it would standardise the stamp duty
regime for non-residential properties such as shops, factory
space, office space and even car parking spaces to avoid
speculative hot money flowing into these other categories.
"It will help forestall any possible shift in exuberance
from the residential market to the non-residential market by
raising the costs," said Tsang.
This week, the controversial sale of 360 hotel suites by
leading local developer Cheung Kong Holdings drew
scrutiny, with buyers able to avoid paying regular stamp duties
charged to residential units, given the commercial nature of the
suites. Tsang, however, refused to be drawn on whether the
latest move was an attempt to close off this legal loophole.
The city's ultra-low interest rate environment, tight supply
and abundant liquidity, pushed property prices up 2 percent in
January, Tsang said, while overall residential property prices
have jumped 120 percent since 2008.
While Tsang said some of the market frothiness had come from
hot money flows from the United States in response to
quantitative easing and a low interest rate regime, this could
change earlier than some people expect. That would cause
mortgage repayments to balloon while "price fluctuation risks
would be increased", he said.
The city's de facto central bank, meanwhile, issued
mandatory guidelines to banks to tighten home loan approval
criterion including maximum loan-to-value ratios of mortgage
loans for all commercial and industrial properties. These would
be lowered 10 percentage points from existing applicable levels.
Some analysts expected the latest round of measures to help
arrest the rise in property prices, for now.
"There will be a big impact in the short term, the
transactions will decrease, as well as speculation," said Thomas
Lam, director of research at Knight Frank "But I think they (the
government) will do more if the property price continues to
increase after 3 months."
The latest round of property cooling in Hong Kong comes on a
series of seemingly tit-for-tat moves by the Singapore
government that has also sought to rein in its own market.
As centres of finance and trade, Singapore and Hong Kong are
on the front line of global hot money flows. Each exports the
equivalent of more than 100 percent of their GDP each year.
They're not the only Asian countries confronting this problem.
Others affected include South Korea, Thailand and even China.
Since October 2009, the Hong Kong government has taken a
series of steps to curb prices, including a 15 percent property
tax on foreign buyers, mortgage restrictions and taxes on quick
resales. However, home-price pressures have continued to pose
policy challenges for officials.
As Hong Kong felt an initial squeeze from property measures
imposed in October, including the 15 percent tax on foreign
buyers, private home sales in Singapore jumped nearly 30 percent
in December from November.
($1 = 7.7557 Hong Kong dollars)
(Reporting by Lee Chyen Yee, James Pomfret, Alison Leung,
Anne-Marie Roantree and Christina Lo; Editing by Ken Wills)