Developers seek tax exemptions on home sales of more than HK$30m

Major property developers in Hong Kong raised objections to the government's recently announced measures to curb skyrocketing home prices, and sought exemptions to a tax which targets overseas and corporate buyers, after home sales fell significantly following the measures' introduction.

"We are gravely concerned over the recent measures introduced by the government to manage the demand side of the property market, especially the proposed buyer stamp duty," Stewart Leung, chairman of the executive committee of the Real Estate Developers Association of Hong Kong (REDA), wrote in a statement addressed to the government.

The Cheung Kong Center stands in Central. Major developers in Hong Kong joined hands to object to the government's recently announced cooling measures to curb home prices. [Photo/Agencies]

The trade association, whose members include Sun Hung Kai Properties, Cheung Kong (Holdings), Henderson Land Development and other major developers in the city, specifically asked the government to exempt apartments worth more than HK$30 million ($3.87 million) and purchases by companies whose directors or shareholders are permanent residents, from the buyer stamp duty.

To prevent a property bubble from bursting, the government imposed its toughest property curbs on Oct 26.

Aside from slapping a 15 percent buyer stamp duty upon purchase of a residential property by non-local and corporate buyers, the government also raised a resale tax on residential property by 5 percentage points to make the tax as high as 20 percent, depending on the length of the holding period, and extended the period during which the resale tax will apply to three years from two previously.

Home sales in the city have slumped over the past several weeks as both buyers and sellers are playing a wait-and-see game, but prices have yet to fall significantly. During the weekend immediately following the announcement of the latest property curbs, only 16 units were sold in the primary market, down 80 percent from the previous weekend, while the secondary market saw only 10 deals in the 10 major housing estates, a record low in the past nine months, according to data from Centaline Property Agency, one of the two major real estate brokers in the city.

The slump in transactions has prompted some of the developers to put their plans to launch new projects on hold.

"The real estate market is now under direct government control - a situation which we consider is unhealthy and potentially dangerous," Leung asserted, urging the government not to take "any measures for the sake of short-term expediency at the cost of risking Hong Kong's hard-earned reputation."

The government has been vigorously defending its latest property curbs, its sixth round since the new administration under Chief Executive Leung Chun-ying came into power.

"The current housing supply lags behind the soaring demand; we need to work on the demand-side measures," Financial Secretary John Tsang said when announcing the measures on Oct 26, emphasizing that these are "exceptional measures adopted in an extraordinary situation", and targeted specific property investors, but not the genuine end-users.

Hong Kong followed the lead of Singapore and Macao in taking the demand-side measures after efforts to boost supply failed to arrest the rise in home prices. Both Macao and the city state had slapped a 10 percent buyer stamp duty on home purchases by overseas buyers.

Prices of second-hand apartments in the city have surged more than 20 percent this year and nearly doubled from 2009 to become the world's most expensive, fueled by record low interest rates, ample liquidity and strong demand from both local residents and non-local buyers - mainly mainland investors.

george@chinadailyhk.com