Hong Kong announced Friday it will raise real-estate purchasing and resale costs to cool its overheating property market down, in a move targeting non-local buyers and speculative activities. The prices of small and medium sized residential flats in the southern Chinese city, famous for its sky-high rent, surged 20 percent for the first nine months of the year, prompting the government to take action.
The new measures include the increase of special stamp duties for properties re-sold within the first three years of its purchase and imposing an extra 15 percent transaction cost on non-local buyers and local and foreign companies. The measures "targets speculative activities, and for most genuine homebuyers it would not affect them because they won't be reselling in a short period of time", said Financial Secretary John Tsang.
The extra 15 percent transaction cost "will cause inconvenience to some non-local buyers. We hope that they will understand that this is an extraordinary measure introduced in exceptional circumstances," Tsang said. The new measures will go into affect on Saturday. Tsang attributed the substantial increase in the demand for property to low interest rates, adding that the city's economy is showing signs of slowing down due to a weak US market recovery and Euro sovereign debt crisis.
"It is apparent that the property market and the local economy are heading in different directions," he said. Tsang also acknowledged that the city was in short supply of residential units. Hong Kong in August unveiled a series of measures to cool the red-hot property market, including to provide around 65,000 new units on the market in the next three to four years. "Maintaining a healthy stable property market will be our ongoing endeavour," Tsang said.