To cool the market, Hong Kong imposes a new 15% property tax on foreign buyers.

 

The Hong Kong government has finally acted to avert a price-bubble collapse by placing a 15% tax on home purchases made by foreigners, in response to mounting pressure from residents who can't afford to buy a home.

In order to deter speculation, the government increased special transaction taxes on assets sold within three years of purchase by up to 20%. The previous rule applied to sales that took place over a two-year period. Local and non-local land owners will also be subject to these new taxes. for sale

Non-permanent residents are identified as foreigners. As customers, the new laws apply to both local and non-local businesses.

The new Hong Kong legislation follows Singapore's decision in December 2011 to place a 10% tax on foreigners purchasing residential property in order to stabilize the housing market.

Despite being a legal part of China, Hong Kong has its own collection of laws and institutions, including a separate currency. A Hong Kong dollar is worth $0.1290 in the United States.

Hong Kong property prices have doubled in the last four years, owing to historically low interest rates and high international demand. According to some Hong Kong Realtors, prices have increased by 20% in the first nine months of this year, surpassing the previous high set during the 1997 property bubble.

The city's economy, on the other hand, shrank by 0.1 percent in the second quarter compared to the first three months. This year's GDP growth is expected to be between 1% and 2%, according to the government.

Continent Chinese investors have been among the most active speculators, purchasing assets that would provide them with higher resale returns. They accounted for around 37% of the total value of newly constructed apartments sold in Hong Kong in the second quarter, according to some local brokerage figures.

The new measure was declared on October 26 by Hong Kong Financial Secretary John Tsang. The law went into effect on Saturday, October 27. In Hong Kong, the majority of real estate transactions take place on weekends.

In a prepared statement, Tsang said, "This is an unprecedented measure introduced under extraordinary circumstances."

While some Hong Kong Realtors believe the new law would result in home price declines of up to 10% in some areas of the region, Barclays in London disagrees. The bank predicted a decrease in transaction volume but little to no price corrections in the short term in its report released today, Oct. 29.

Residential property transactions in the city's ten major private housing complexes dropped 43 percent over the weekend from the previous week, according to Centaline Property Agency Ltd, the city's largest realtor by market share.

Ricacorp Properties, another major Hong Kong brokerage, recorded a 46 percent decrease in revenue following the Oct. 26 announcement.

On Monday, property stock prices in Hong Kong dropped as well. Henderson Land Development Co. Ltd has dropped 7%, Sun Hung Kai Properties Ltd. has dropped 6%, and Midland Holding Ltd. has dropped 16%.

"The Hong Kong government's latest actions come just days after the city's de facto central bank sold nearly $2 billion worth of local currency to protect its peg to the dollar, a sign of the capital influx from the new round of US credit easing that some analysts fear could impact real estate," according to the Wall Street Journal.