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(Source : Information Services Department)

LCQ4: Further measures to address overheated property market


     Following is a question by the Hon Lam Tai-fai and a reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (November 14):


     The Government announced on the 26th of last month that it would amend the Stamp Duty Ordinance to increase the duty rates and extend the property-holding period in respect of the Special Stamp Duty, and introduce a Buyer's Stamp Duty (BSD) equivalent to 15% of the property price payable by all companies and non-Hong Kong permanent residents acquiring residential properties. In this connection, will the Government inform this Council, before introducing the aforesaid measures, whether:

(a) it has consulted legal professionals or experts outside the Government on whether BSD should apply to residential properties acquired by buyers in the names of companies; if it has, of a detailed list of the names of such persons and their legal advice; if not, the reasons for that;

(b) it has assessed the amount of capital that will flow to places outside Hong Kong for property investment because of the implementation of such measures by the Government; if it has, of the details; if not, the reasons for that; and

(c) it has assessed the impact of such measures on the small and medium enterprises using residential properties as collateral to seek financing from banks; if it has, of the details; if not, the reasons for that?

Reply :


     In recent months, in the midst of a continuous exuberant state of the property market, as well as a tight supply of residential flats, it is apparent that the overheated property market and the economic fundamentals are heading in different directions, and property prices are rising beyond the affordability of the general public. The risk of a property bubble has increased substantially. In view of this, the Financial Secretary (FS) announced on October 26, 2012 a new round of demand-side management measures, namely, to adjust the duty rates and extend the coverage period in respect of the existing Special Stamp Duty (SSD), and to introduce a Buyer's Stamp Duty (BSD) which will be charged for all residential properties acquired by any person except a Hong Kong Permanent Resident (HKPR). BSD will be levied at a flat rate of 15 per cent on top of the existing stamp duty and SSD, if applicable. Purchase of flats by HKPR will not be subject to BSD. The Government envisages that the adjusted SSD will dampen the incentive of short-term investors to purchase properties, and that the BSD will have the same effect on non-HKPRs and companies, hence according priority to addressing the housing needs of HKPRs.

     There is no doubt that the fundamental issue to tackle in addressing the current housing situation is land supply. We will continue with our efforts to increase land supply to tackle the problem at source. However, under the current exceptional circumstances, we need to introduce exceptional measures to manage the housing demand, with the aim of preventing the risk of a property bubble from hampering the stability of the macro-economy and the financial system, and eventually affecting people's livelihood. We will consider withdrawing these measures after the demand-supply situation of the property market has regained its balance. Property prices are influenced by many evolving factors. We will continue to monitor closely the situation of the property market and make appropriate adjustments as and when necessary. To respond more speedily to the development in the property market, we plan to propose, during the process to amend the Stamp Duty Ordinance, that in future the rates of SSD and BSD be revised by way of subsidiary legislation subject to negative vetting. We will provide further details in the relevant Amendment Bill to be introduced, and will listen to Members' views on this issue.

     Subsequent to FS's announcement of the new measures on October 26, 2012, the Administration has arranged to meet with the Consulate-Generals, the Law Society of Hong Kong, the Real Estate Developers' Association of Hong Kong, the Estate Agents Authority, the estate agency trade, as well as local and international chambers of commerce, etc. to brief them on the new situations. We would like to emphasise the Government's unwavering determination in upholding the free market principle and the market mechanism.

     Our reply to the various questions raised by the Hon Lam Tai-fai is as follows:

(a) The proposals to adjust the existing SSD and to introduce BSD on residential properties acquired by any person and company except a HKPR are highly market-sensitive information. In accordance with the established practice, the Government had not involved any party outside the Government in the process of formulating taxation-related proposals. Even the deliberation within the Government was confined to a few senior Government officials on a strictly need-to-know basis. In the past few months, we have been taking heed of different views of the community on the property market, including those from experts, academics, think tanks and the trade. In formulating the proposals, we have also fully taken into account the general calls from the public for further measures to combat speculative activities, cool down the exuberant property market, and ensure that the housing demand from HKPR-buyers be accorded priority.

(b) The international flow of capital is affected by various factors, including the global macroeconomic outlook, financial market developments and investors' risk appetite, which are subject to considerable uncertainty over time. Since there are no restrictions on capital flows into and out of Hong Kong, it is not possible to assess or project the capital inflow or outflow. We believe that the enhancement of the SSD regime will increase the cost of speculation and thus a significant portion of such transactions would disappear following the announcement, especially short-term resale cases. As to BSD, it should be effective in reducing demand from non-HKPR buyers, thereby according priority to meeting the housing needs of HKPRs under the current tight demand/supply balance in the housing market.

(c) As mentioned above, the two measures are introduced for the purpose of managing demand and further curbing speculation amidst the current tight supply and exuberant state of the residential property market, thereby facilitating the healthy and stable development of the property market in Hong Kong, helping to reduce the risk of a property bubble and maintaining the stability of the macro-economy as well as the financial system, which are of vital importance to the overall business environment.

     As to whether the measures will have impact on small and medium enterprises (SMEs) using residential properties as collateral to seek financing from banks, as a matter of fact, banks will take into account various factors, such as their relationship with the SMEs, as well as the reputation, operation, repayment ability, liquidity demand and business plans of the SMEs, in processing their loan applications. Banks will not rely solely on the value of collateral (such as properties, machinery, securities and deposits) to decide whether or not to offer loans to SMEs. As such, we consider that the relevant new measures would not have any real impact on SMEs in seeking financing from banks.

Ends/Wednesday, November 14, 2012
Issued at HKT 15:36