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Hong Kong Reviews Property Tax Measures

by Mary Swire,, Hong Kong

22 December 2014

Following a question in Hong Kong's Legislative Council (LegCo) on December 17, Secretary for Transport and Housing Anthony Cheung Bing-leung replied that the stamp duty measures put in place since 2012 have helped to "stabilize the residential property market, and are effective in combating short-term speculative activities."

In addition to the increased Special Stamp Duty (SSD) rate (from 10 percent to 20 percent on properties held for less than 36 months) and the introduction of a 15 percent Buyer's Stamp Duty (BSD) on purchases of residential properties in 2012, the Government had also felt it necessary, in February 2013, to double the rates of existing ad valorem stamp duty (AVD) applicable to both residential and non-residential properties.

However, in order to address the home ownership needs of HKPRs, the Government has also granted exemptions in the SSD, BSD and new AVD regimes for HKPR buyers who are not beneficial owners of any other residential property in Hong Kong at the time of acquisition.

Cheung noted that the measures were taken "to address the overheated property market, combat speculative activities, ensure healthy and stable development of the property market, and accord priority to the home ownership needs of HKPRs in the midst of the present tight housing supply."

He suggested that they have had relative success given the slowdown in property prices (from 2.7 percent per month on average for the first two months of 2013, to only 0.6 percent per month on average from March 2013 to October 2014) and in the number of short-term resale transactions.

In addition, purchases of residential property by non-local individuals and non-local companies stood at a monthly average of only 1.7 percent of the total transactions in the third quarter of 2014, markedly below the monthly average of 4.5 percent of the total transactions from January to October 2012.

Cheung added that, while the Government "understands that these measures will cause inconvenience to certain buyers as well as business and industrial enterprises, we consider it necessary to enhance demand-side management under the exceptional circumstances of low interest rate, abundant liquidity and serious demand-supply imbalance. … The demand-side management measures help protect Hong Kong's macroeconomic and financial stability, which is of benefit to the overall economy of Hong Kong in the long term."

However, he also pointed out that "the demand-side management measures are extraordinary measures introduced under exceptional circumstances. We will continue to closely monitor the property market with reference to a series of indicators and review the situation at the appropriate time."

"These indicators include property prices, affordability of the public, transaction volume, the supply situation, and the ratio of mortgage or rental to income, as well as changes in the local and external economic situations," he added. The Government has also undertaken to review the demand-side management measures after one year, and report the outcome to the LegCo.

TAGS: individuals | tax | investment | business | real-estate investment | real-estate | tax rates | stamp duty | Hong Kong

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