William Yue was ready last week to pay about HK $ 11 million ($ 1.4 million) for an apartment in Hong Kong Kowloon Tong district. Now, he is reconsidering.
Financial Secretary, John Tsang, on 19 November raised registration fees and deposit requirements, and mortgage insurance limited, however, tougher measures to curb the value of homes soared 50 percent since January 2009. Li Ka-shing's Cheung Kong (Holdings) Ltd. fell more than six months, and Midland Holdings Ltd., the largest city realtor, fell more than a decade.
"The signal we have to pay would probably be a little out of our budget," said the 58-year-old Yue yesterday. "We have to negotiate with the seller again and see if the price was lower. Imposing the additional stamp duty should have been enough to curb speculation. The only thing it does is damage to the real users like us."
Weekend home sales fell 83 percent from the previous week, according to Centaline Property Agency Ltd. The changes mean homes sold within six months of purchase incur a duty of 15 per cent of stamps, while The initial payment shall be 50 percent of the properties cost HK $ 12 million or more, and 40 percent to HK $ 8 million and HK $ 12 million.
"The measures will likely have the greatest impact and more lasting in property prices seen to date," said Donna Kwok, a Hong Kong economist at HSBC Holdings Plc, in a report. "Hong Kong has joined the bandwagon of Asian central banks and is building its own defenses to cope with the flood" of the capital of the flexibility of the U.S., he said.
Hong Kong's currency peg to the dollar prevents the de-facto central bank to raise interest rates to prevent speculation. South Korea, reviving a tax on foreigners investing in its bonds last week, while Brazil has tripled the tax on local purchases of fixed assets of foreign investors.
Shares Fall
The Hang Seng index of property, which tracks builders seven largest city, fell 2.6 percent in the time close to 16:00 on business premises. It has fallen 10 percent since the peak of this year on 8 November.
Cheung Kong, the second largest developer by market value city, lost 3.2 percent, while Sun Hung Kai Properties Ltd., the largest, fell 3.1 percent. Midland fell 17 percent.
"This is a strong dose of calming the housing market," JP Morgan Chase & Co. analysts led by Lucia Kwong wrote in a report dated yesterday. "Taking into account the new measures are expected to slow sales of properties that reduce the" net asset value for developers.
The number of transactions in some of the largest in Hong Kong private housing dropped to 10 on November 20 and 21, Centaline, the city's largest private property agent real estate, said in a statement. There were 59 deals last weekend.
"We expect transactions to fall by between 10 and 20 percent this quarter, and prices will probably drop 5 percent less," said Wong Leung-sing, associate director of research at Centaline.
Housing developments
The agent had a single transaction on November 20 in 12,700 unit-Tai Koo Shing urbanization in Hong Kong Island, from six in the previous week, district manager Kenneth Chiu said yesterday.
"Most of the buyers who've been talking to said they expect prices to fall further so I will hold off making a decision now," said Chiu. "On the other hand, sellers on average are willing to lower the asking price."
The prices in the city of origin may fall 5 percent by year-end, while the transactions may fall 40 percent due to the measures, Credit Suisse Group AG analyst Cusson Leung and Kwock Joyce wrote in a report released today. JP Morgan also predicted a 5 percent decline in prices.
Fall transactions
Prices in some of the most expensive in Hong Kong, Kowloon Tong in Kowloon peninsula, bordering China, increased 52 percent since early 2009, according to an index compiled by Centaline. Those gains prompted the International Monetary Fund last week warned that asset inflation could derail the city's economy.
The measures will drag on the earnings of house prices rather than invest the proceeds, UBS AG, said in a report. Real estate transactions are reduced by 20 percent to 30 percent, the analyst Eric Wong said, adding that the liquidity measures can lead to other assets like stocks.
Under the new measures, resale properties within 6 months to 12 months will have a duty of 10 per cent of seals, while resold between 12 and 24 months will be charged 5 percent, said Tsang. The fee is divided between buyers and sellers.
Down payments for households cost HK $ 12 million or over will increase from 40 percent and those of HK $ 8 million and HK $ 12 million of 30 percent, the Hong Kong Monetary Authority Chief Executive Norman Chan , said 19 November. The maximum loan to value residential properties not occupied by their owners will drop to 50 percent, said Chan.
More sidewalks
It was the second time the government raised the requirements for a down payment this year. On August 13 were for apartments increased costs HK $ 12 million or more and for investment property at 40 percent, 30 percent.
Hong Kong Mortgage Corp., an insurance company in the home loan backed by the government, Hong Kong limited to $ 6,800,000 the value of a property that may be covered by mortgage insurance, said on 19 November.
Hong Kong this year has also stopped offering residence to foreigners who buy property in the city and pledged to increase the land supply to curb prices, which surpassed a peak of 1997 on the back of historically mortgage rates low and an influx of buyers from China.
The government "will monitor the market" and may introduce new measures if the final turns not arise property prices, Tsang, wrote yesterday in his blog on the website of the government. The program to buy U.S. bonds announced earlier this month has increased the risk of asset bubbles in Hong Kong and is necessary for the government to take "preventive" measures, Tsang wrote.
'Extra Careful'
"We must be very careful," Chow said tallow-kuen, a retired civil servant who is looking to buy an investment apartment, a day after government measures. "We are not speculators, but the additional stamp duty may require us to hold onto properties below. I will probably wait to see how the market reacts."
Chow, who was in the Hung Hom district sales office for the Festival of Cheung Kong, Phase II City project in Sha Tin District, said his family was a long-term investor and owner of three properties investment in the Kowloon area.
The developer began selling 335 units in the Festival City for Phase II of the afternoon of 19 November.
However, Fred Leung, a businessman of 40 years old, looking to buy an apartment to live in the Festival City, said the stamp duty is not affected, although it may deter purchase.
"I can see how the stamp would affect the speculators, but not really concerned," Leung said a day after Tsang announced the measures. "I'm not sure if I will make a decision now, and we really hope that the developer will lower the prices of the units later."
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