HK Housing Restrictions Said No Match for Mainland Investor Demand

Those hoping the Hong Kong government’s latest attempts to cool home prices in the world’s most expensive housing market had better not hold their breath. While there may be a decline in transactions during the remainder of the year, the stamp duty hike experts doubt the measure’s effectiveness in the face of growing mainland demand.

In the short term, developers are likely to re-evaluate their sales strategies and buyers may hold off on making purchases, but bargain hunters may be out of luck.

“As part of their sales strategies, we expect developers to offer more substantial stamp duty rebates but they may offset these higher costs by increasing list prices by 10-15 percent,” Henry Mok, regional director of Capital Markets at JLL, said. “The new measure will also likely dampen investment demand for secondary homes, though the holding power of most homeowners should remain strong. All-in-all, we should see property prices holding up better than expected.”

The veteran broker predicts that the continuing buying power of local homeowners, combined with increasing demand from the mainland, should mean that any dip in prices will be short lived.

Additionally, some homebuilders are already looking for ways to attract buyers despite the 15 percent across the board stamp duty increase. Several developers, including Sun Hung Kai Properties Henderson Land Development and New World Development, suspended or canceled sales at select residential projects in the wake of the government’s stamp duty hike announcement.

Loopholes, Mainland Interest Derail Cooling Measures

While some experts predicted home prices to drop by as much as 5-8 percent in the short term, loopholes and an uptick in mainland buyers means the new curbing measures aren’t likely to have the impact the government was hoping for.

The 15 percent stamp duty does not include first-time buyers, which has seen some families assigning a non-homeowner representative to purchase a residential unit, or sometimes multiple units, in a bid to avoid paying the additional fees, a recent JLL report noted.

Skyrocketing home prices in Shenzhen, Shanghai and other places in China has seen more than 20 cities across the mainland roll out tightening measures of their own in an attempt to drive down prices. This has caused Chinese homebuyers to seek out residential properties overseas and they have set their sights on Hong Kong. Mainlanders purchased an estimated 30 percent of Hong Kong’s new luxury homes during the first two weeks of October.

New HK Stamp Duty Got Off To An Inauspicious Start

Hong Kong’s government was left red in the face when three days after the new stamp duty was implemented, the most expensive apartment in Asia was sold. A pair of units at phase two of Wheelock and Company’s Mount Nicholson sold for HK$104,803 ($13,514) per square foot bringing in a total of HK$912 million ($117 million).

At the time of the sale, Wheelock Properties Chairman Stewart Leung Chi-kin said the purchaser was a first-time homebuyer and would not be obligated to pay the stamp duty. It was speculated that the buyer was a child from a super-rich family who did not own any apartments.

It was later revealed that billionaire Edwin Leong Siu-hung purchased the record setting apartments. In an interesting twist, the chairman and founder of property developer Tai Hung Fai Enterprise reportedly told Oriental Daily that he did not have any properties under his name prior to buying the luxury apartment which would make him exempt from having to pay the 15 percent stamp duty.