While activists took to the streets to protest Beijing’s move to reinterpret city law and ban two elected officials from retaking their oaths to join the legislature, the Hong Kong government is protesting home prices which rank as the world’s least affordable.
Last week, the government rolled out new curbing measures increasing stamp duty to 15 percent for all residential purchases. The new rules appear aimed at speculators, including out of town buyers, and exempt first-time homebuyers who are permanent residents.
According to Bloomberg, foreign buyers will be required to pay the new stamp duty on top of the 15 percent stamp duty already levied. Prior to the new measures, the highest duty for residents was 8.5 percent.
The move will likely send home prices downwards in Hong Kong with Louis Chan, chief executive of the residential unit of Centaline Property Agency, predicting transaction volumes dropping by 60-70 percent in the next three months and home prices falling 5-8 percent drop during the same period.
Home prices began to fall in early 2016 after rising by more than 150 percent over the seven years ending in 2015. However, home prices in Hong Kong started trending upward once again earlier this year prompting the government to take action in an attempt to make the world’s costliest property market a little more affordable.
Developers Halt Sales to Rethink Strategy
Developers looking to sell units are now scrambling in the wake of the news with several homebuilders halting sales for at least nine major projects across the city. Sun Hung Kai Properties suspended sales at six projects while Henderson Land Development and New World Development also canceled sales at select residential projects, according to the South China Morning Post.
Swire Properties has decided to postpone relaunching its Whitesands project on Lantau Island. Last week, Swire revealed discounted prices for 12 houses in its upscale development, but decided against putting them up for sale in light of the stamp duty increase.
The news has caused developers to take a beating on the stock market as well. Both Cheung Kong Property and Sun Hung Kai Properties were among the hardest hit on Monday.
Mainland Developers Exposed In Hong Kong
HNA Group might be feeling some buyer’s remorse after paying a record HK$8.8 billion ($1.13 billion) for a residential site near Hong Kong’s old international airport. However, they are only one of a number of mainland developers bracing for turbulent times.
Research from Deutsche Bank showed mainland developers acquired HK$9.8 billion ($1.77 billion) worth of public land sites during the first nine months of this year.
In August, Minmetals Land paid HK$4 billion ($515 million) for a residential site in Yau Tong that was formerly part of an industrial complex. That deal was labeled “outrageous” by Knight Frank’s head of valuation and consultancy, Thomas Lam at the time.
Shenzhen-based China Vanke is the most active mainland homebuilder in Hong Kong having snapped up HK$8.09 billion ($1.04 billion) worth of residential sites including, the acquisition of a HK$3.8 billion ($490.12 million) land plot in New Territories last year.