Hong Kong developers are urging the government to adjust its first property tax targeted at overseas and corporate buyers because it threatens the city’s “hard-earned” reputation as one of the world’s freest markets.
The government should exempt buyers of apartments costing more than HK$30 million ($3.9 million), and purchases by companies whose directors or shareholders are Hong Kong permanent residents, the Real Estate Developers Association of Hong Kong said in a statement today.
“The real estate market is now under direct government control - a situation which we consider is unhealthy and potentially dangerous,” Stewart Leung, chairman of the executive committee at the association, wrote in a proposal to the government. “We would respectfully advise against taking any measures for the sake of short-term expediency at the cost of risking Hong Kong’s hard-earned reputation.”
Chief Executive Leung Chun-ying imposed his most stringent set of property curbs on Oct. 26, including a 15 percent tax on non-local and corporate homebuyers, to ease risks of a real estate bubble after home prices doubled in almost four years as interest rates stayed close to record lows and buyers from other parts of China snapped up apartments.
Hong Kong’s currency peg to the U.S. dollar and a shortage of land supply for many years are the two “real causes” for the present situation, according to the proposal by REDA. The association represents the city’s developers, including Cheung Kong (Holdings) Ltd., Sun Hung Kai Properties Ltd., New World Development Co. and Henderson Land Development Ltd.
The city’s de-facto central bank was forced to defend the currency’s peg to the U.S. dollar for the first time since 2009 last month as the Federal Reserve’s third round of quantitative easing sparked an inflow of cash into the city.
Secondary private residential property prices fell 0.55 percent in the week of Nov. 12-18 from a week earlier, Centaline Property Agency Ltd. said on its website today. That was the first decline since the week ended Sept. 16.
Leung, who took office in July, said in September that there will be as many as 65,000 new private units available in the next three to four years. That’s at least 30 percent more than the average under Donald Tsang, his predecessor, according to estimates by Nicole Wong, an analyst at CLSA Asia-Pacific Markets.
Leung has also sped up the approval of permits for private project sales and will sell public units that were originally intended for rent.
While it takes time for the land supply to be increased, REDA suggests the government help first-home buyers by waiving a stamp duty and relaxing the loan-to-value ratio of their mortgages to as much as 90 percent.
A typical two-room, 600-square-foot apartment on Hong Kong Island costs about HK$5.4 million, or HK$9,000 per square foot, according to estimates by realtor Midland Holdings Ltd.
Tens of thousands of protesters took to the streets in a largely peaceful demonstration in July, hours after Leung pledged to do more to address poverty and boost public housing.
Hong Kong’s Gini coefficient, which measures income inequality, has gained from 0.43 in 1971 to 0.537 in 2011, according to government statistics. A reading of zero means income equality and one complete inequality.