ST : HK may cool property sector further

Nov 23, 2010

HK may cool property sector further

HONG KONG: The Chinese city's Financial Secretary has hinted at further measures to cool the red-hot Hong Kong property market, as real estate agents reported a drop-off in sales after tough new rules were unveiled last week.

'We will launch appropriate measures again when it's needed,' Financial Secretary John Tsang wrote on his blog on Sunday. 'I can say without a doubt, we will not turn a blind eye to the risks that are affecting our economy and financial stability.'

The city needs to be decisive and proactive in mitigating the risks posed by the asset bubble, he added. 'It unsettles me to know that speculators are capitalising on market sentiments...to make profits.'

Mr Tsang on Friday last week unveiled a range of measures aimed at restraining property prices - the toughest steps yet to rein in home values that have soared more than 50 per cent since January last year. Among the measures was a sliding scale of new stamp duties aimed at discouraging people from selling property quickly after buying it.

As of the weekend, anyone reselling a property within six months of purchase is now subject to a 15 per cent stamp duty. A 10 per cent duty applies to sales within six to 12 months, and 5 per cent within 12 to 24 months.

The head of the Hong Kong Monetary Authority, the city's de facto central bank, also outlined measures tightening the issuance of mortgages.

The measures appeared to have an immediate impact, with secondary residential home sales dropping off over the weekend. Weekend sales of used homes fell 83 per cent from the previous week, according to data from Centaline Property Agency, the city's largest closely held real estate broker.

Ricacorp, one of Hong Kong's largest real estate agents, said sales had plunged by 70 per cent on Saturday and Sunday, compared with the previous weekend. 'Clients are postponing signing contracts,' managing director Willy Liu told Agence France-Presse.

Mr Raymond Chan, regional sales director of Midland Realty, said sales of newly built properties had also dipped: 'We expected a blow-out sale for a property launch last Friday, but it sold only around two-thirds, far short of our expectations.'

The United States bond purchase programme announced earlier this month has heightened the asset bubble risk in Hong Kong and it was necessary for the government to adopt 'pre-emptive' measures, Mr Tsang wrote on the blog.

There is no need to change the city's currency peg to the US dollar as this is not the 'major factor' leading to an asset bubble risk, he said. The Hong Kong dollar has been pegged to its US counterpart since 1983.

BLOOMBERG, AGENCE FRANCE-PRESSE