Hong Kong developers’ share prices plunged on the 7th of November 2016 after the government announced the highest stamp duty yet on property transactions in the city.
Analysts said the new tightening came as a big surprise and they expect home prices to face severe cooling pressure as a result.
The Hong Kong government raised the stamp duty on ALL residential transactions to 15%, from the previous range of 1.5-8.5%, effective from November 5. However, first-time home buyers with permanent Hong Kong identity cards are excluded from the purchase tax.
Counting previous curbs, the total transaction cost for non-locals buying a property now equals up to 30% of the total purchase price.
The increase in stamp duty to 15% was “unexpected”, JP Morgan analysts wrote in a note. “This is likely to hurt sentiment significantly, causing a sharp drop in transaction volume for both the primary and secondary markets,” the firm said.
Credit Suisse analysts also reported that they expect a 25% drop in residential demand as a result of the higher purchase tax.
Cheung Kong Property Holdings slumped 8.8%, Sun Hung Kai Properties fell 9.8%, New World Development dropped 9.3% while Henderson Land declined by 5.9% at the close of trading. The city’s benchmark Hang Seng Index was up 0.7% on the day.
