A Government spokesman said today (November 19) that the Government would introduce a Special Stamp Duty (SSD) on residential properties to curb speculation.
The Government will amend the Stamp Duty Ordinance (the Ordinance) by introducing, on top of the current ad valorem property transaction stamp duty, an SSD on residential properties of all values at the point of resale if the properties are acquired on or after November 20, 2010 and resold within 24 months after acquisition.
The SSD will have three levels of regressive rates for different holding periods -
(i) 15% if the property has been held for six months or less;
(ii) 10% if the property has been held for more than six months but for 12 months or less; and
(iii) 5% if the property has been held for more than 12 months but for 24 months or less;
"We propose that both the seller and the buyer, be it an individual or a company, will be held jointly and severally liable for the SSD. This is in line with the current law," the spokesman said.
To deter non-compliance, the existing statutory sanctions under the Ordinance will be extended to cover the SSD. Any person who fails to pay the SSD by the deadline for payment shall be liable to penalties up to 10 times the amount of the SSD payable. The evasion of SSD by fraudulent practise shall be a criminal offence, as with the evasion of normal stamp duty under the existing Ordinance.
Moreover, further to the disallowance of deferred payment of stamp duty for all residential property transactions valued at more than $20 million with effect from April 1, 2010, deferred payment of the current ad valorem property transaction stamp duty for all residential property transactions valued at $20 million or below will not be allowed. The stamp duty has to be paid within 30 days after the signing of the Agreement for Sale and Purchase.
Apart from the aforementioned new measures relating to stamp duty, the Hong Kong Monetary Authority will continue to closely monitor the market situation and make adjustments to the risk management guidelines for banks.
The Government has been monitoring the development of the private residential property market closely and remains vigilant on the risks of a property bubble. Various measures have already been introduced at different stages since February this year to ensure the healthy and stable development of the property market. While these measures are taking effect, owing to extraordinary external factors, the private residential property market is still volatile.
"More worryingly, the exuberant state of the property market has spread to the mass market. The current property boom is fuelled by a heavy element of speculative activities, as suggested by the 32% surge in the number of 'resales within 24 months' in the first nine months of 2010, as compared with the same period in 2009. Within the total, the number of 'resales within 12 months' surged by an even more rapid 114%, indicating a shift in speculative activities to a shorter horizon. Also, there is a higher incidence of short-term resales in the lower end market, with 84% of the short-term resale within 12 months in the first half of 2010 being transactions below $3 million," he said.
With the announcement by the United States Federal Reserve on the launching of the second round of "quantitative easing" amounting to US$600 billion on November 3, 2010, more funds are expected to flow to the emerging markets, in particular Hong Kong, given the strong economic fundamentals and absence of capital control here.
Taking into account these developments, the Government considered it necessary to introduce further measures targeted at speculators, including special stamp duty on the sale of residential properties within 24 months after acquisition, to curb speculative activities, reduce the risk of the development of an asset bubble and ensure the healthy and stable operation of the property market. At the same time, genuine home buyers and long term investors should not be affected by these measures.
The Government expects that these measures will send a clear signal to anyone minded to make quick profits through speculating in the Hong Kong property market, and they will have to reckon with these measures and other possible measures that the Government will adopt as and when necessary.
Ends/Friday, November 19, 2010
Issued at HKT 19:29