$100 property stamp duty now covers deals up to $4m

Themis Qi

Hong Kong has increased the maximum value of residential and non-residential properties are entitled to a nominal stamp duty of HK$100 from HK$3 million to HK$4 million to boost the market.

And the administration plans to put eight residential sites on the land sale list in the coming fiscal year but will not include any commercial plots to allow the market to absorb existing supply.

Paul Chan said the higher limit would help ease the burden on local buyers.

The new rule will save buyers up to HK$59,900 or 99 percent in stamp duty on transactions valued at up to HK$4 million.

The adjustment is expected to benefit about 15 percent of property transactions and reduce government revenue by about HK$400 million annually, said Chan.

Government sources said the nominal HK$100 stamp duty wasn't applied to more expensive properties, as authorities needed to consider the impact on revenue.

Deals for homes under HK$4 million are likely to double in March over this month, said Centaline Property Agency, while for the whole year Midland Realty expects the number of homes that are bought and sold between HK$3 million and HK$4 million to increase over 20 percent year-on-year to 10,000, which would be a new high in nine years.

Ahead of the budget, the Real Estate Developers Association had called on the government to lower the stamp duty for first-time home buyers to help young people get on board the property ladder.

Meanwhile, the government is controlling property supply by planning to offer around 13,700 flats from the eight residential sites on the land sale list as well as railway, Urban Renewal Authority and private projects, over 9 percent lower than the estimates for the current fiscal year.

No commercial sites will be rolled out for sale in the upcoming year due to elevated office vacancy rates and a projected sufficient supply in the coming years, according to Chan.

"We will also consider rezoning some commercial sites for residential use and allowing greater flexibility in land use," he said.

Chan announced an extension of the deadline for completing in-situ land exchanges for commercial sites in the Hung Shui Kiu/Hau Tsuen New Development Area to align with ongoing work.

But the authorities will still prepare land for the construction of about 80,000 private homes in the coming five years, of which about 65 percent will come from the Northern Metropolis and the Tung Chung New Town Extension, he said.

Developers including Wheelock Properties and Henderson Land Development expect the new measures to benefit sales of their projects.

It comes as private home prices fell 24 percent over the past three years despite a series of stimuli rolled by the government, pushing the developers to launch their new projects at market levels or below.

Offices in the city saw vacancy rates hit a 25-year high last year, and the rentals are expected to continue to fall this year.

But CBRE projected the budget to have a "neutral" impact on the city's real estate sector, as the high financing costs and an oversupply of properties would keep barring the investment demand from increasing significantly.