Stamp duty is lowered for first-time buyers

Aiden He

Hong Kong is lowering the stamp duty for first-time buyers of properties under HK$10.08 million in a bid to help people get on the property ladder although the government stressed that "spicy measures" remain unchanged.

This measure, which has been implemented, will benefit 37,000 buyers with Hong Kong permanent residency and cost the government approximately HK$1.9 billion per year, Paul Chan said.

The stamp duty for property transactions, or property tax, varies by real estate prices. Under the new rule, the threshold of homes that are entitled to HK$100 stamp duty has been raised from HK$2 million to HK$3 million.

And the rate for starter homes valued at HK$6 million will be cut from 3 to 2.25 percent, which means HK$45,000, or 25 percent of the total tax will be saved from the transaction.

Residential homes under HK$9 million will benefit the most from the levy cut although those priced under HK$10.08 million will also profit from it.

The tax for buying homes costs between HK$9 million and HK$10.08 million will be HK$270,000 plus 10 percent of the excess amount over HK$9 million.

Chan said the adjustments will not have much of an impact on the overall property market and those who want to flip the flats for profit are still subject to the special stamp duty rate of up to 20 percent. But the change will help ease the burden on first-time home buyers who accounted for more than 90 percent of the total residential property transactions last year.

Representatives of local developers including Sun Hung Kai Properties and Wheelock Properties believe the lower levy would stimulate sales.

Louis Chan Wing-kit, Asia-Pacific vice-chairman at the residential division of Centaline Property Agency, welcomed the "symbolic" duty cut, which he believes will boost property prices by 1 to 2 percent and transactions by 20 percent.

But a surge in prices is unlikely due to the huge future supply of private housing and the uncertainty of the pace of interest rate hikes in the US, he added.

Private home prices tumbled by the most since 1998 at 15.6 percent last year as interest rates climbed. But some expect the border reopening would lift the sentiment and overall property prices by five to 10 percent this year.

Small and medium homes valued under HK$10 million made up more than 80 percent of last year's sales and will continue to dominate the market in the future, said Sammy Po Siu-ming, chief executive of Midland Realty's residential division.

The tax reduction is the first modification to the ad valorem stamp duty since 2010, but "spicy measures" such as stamp duties applying to second-home and non-Hongkonger purchases stay the same even amid a softened housing market.

That suggests there will be little chance of relaxation in the future, said JLL Hong Kong chairman Joseph Tsang Hon-ping.