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LCQ14: Impact of the special stamp duty on the property market

     Following is a question by the Dr Hon Priscilla Leung Mei-fun, and a written reply by the Acting Secretary for Transport and Housing, Mr Yau Shing-mu, in the Legislative Council today (November 23):


     After the Financial Secretary had proposed on November 19 last year to introduce a special stamp duty (SSD) on residential properties at the point of resale, some members of the Hong Kong Real Estate Agencies General Association stated publicly that the transaction volume of second-hand residential properties had dropped significantly after the introduction of the SSD, registering a cumulative drop of more than 60%, and they anticipated that a considerable number of small-sized and medium-sized estate agents would close down.  On September 28 this year, a medium-sized estate agent which had operated in Hong Kong for eight years, running 18 branches in its heyday, closed down, and some members of the trade even anticipate a fresh wave of closures by the end of this year.  In this connection, will the Government inform this Council:

(a) whether it knows the total number of estate agents which have closed down since this Council enacted the Stamp Duty (Amendment) (No. 2) Bill 2010 (the Bill) on June 22 this year to implement the SSD; and how many people who were originally engaged in the business of estate agency have lost their jobs or switched to other trades;

(b) of the respective number of transactions of local second-hand residential properties before and after the introduction of the SSD;

(c) of the number of cases of second-hand residential properties being traded by means of transfer of company shares after the introduction of the SSD; how this figure compares with that before the introduction of the duty; if the number of such cases shows an upward trend after the introduction of the SSD, whether the authorities have assessed if this trend is directly related to the introduction of the SSD;

(d) whether the prices of second-hand residential properties in Hong Kong have fallen in tandem with the Government's proposal of introducing the SSD, and of the rate of reduction; whether the intended targets of the introduction of the SSD have been achieved;

(e) given that the authorities have indicated that a review of the SSD will be conducted in 24 months after the enactment of the Bill, whether they will conduct the review earlier in response to the current wave of closures of estate agents;

(f) whether the authorities have assessed the impact of the SSD on the estate agency trade before studying the introduction of the SSD; if so, of the assessment results;

(g) given that there are comments that the estate agency trade is virtually a "thermometer" for the economy of Hong Kong, whether the authorities have assessed if the blow dealt to the estate agency trade by the introduction of the SSD will affect the economy of Hong Kong as a whole; and

(h) whether the authorities will look into the provision of assistance, e.g. reducing the licence fees and the land search fees of the Land Registry next year, to prevent closures of estate agents in a larger scale?



     The Government has been monitoring developments in the private residential property market closely and remains vigilant on the risks of a property bubble.  Since 2010, the Government has been responding to the situation through the introduction of long, medium and short-term measures in four areas, including increasing land supply, combating speculative activities, enhancing the transparency of property transactions, and preventing excessive expansion in mortgage lending, with a view to ensuring the healthy and stable development of the property market.  The Special Stamp Duty (SSD), which is part of the aforementioned package of measures, aims to combat short-term speculative activities involving residential properties.

     The effect of SSD in curbing short-term speculative activities has been obvious.  Statistics show that on average there were 85 subsale cases (i.e. confirmor cases) per month in the first ten months of 2011, representing a drop of over 70% as compared to the monthly average before the announcement of the introduction of SSD (there were on average about 320 subsale cases per month in the first eleven months of 2010).

     My reply to the various parts of the question is as follows:

(b) and (d) I will first respond to those parts of the question on the residential property market, i.e. parts (b) and (d).

     With moderating economic growth in the advanced economies recently, deterioration of the European debt problems and the consequential financial market gyration, coupled with successive hikes in mortgage rates by the local banks since March 2011, there have been uncertainties over the prospects for the residential property market.  There were about 75 000 residential property transactions (including first-hand and second-hand residential properties) in the first ten months of 2011, which represented a drop of about 34% as compared to the 113 000 transactions in the same period of last year (i.e. before the announcement of the introduction of SSD).  As for the second-hand residential property market, there were about 67 000 transactions in the first ten months of 2011, which represented a drop of about 34% as compared to the 101 000 transactions in the same period of last year.  The overall residential property price index showed a cumulative increase of about 13% in the first nine months of 2011.  That said, the index has started to fall since June 2011, and has dropped by 2% in three months prior to September 2011.  The development of the property market is affected by various internal and external factors rather than a single measure.

     The Government will continue to monitor closely the residential property market, and will take appropriate measures as and when necessary to ensure the healthy and stable development of the property market.

(c) Since April 2010, the Stamp Office has been compiling statistics on suspected speculation cases in the form of share transfers of "property holding companies" , which the Stamp Office has referred to the Assessing Unit for follow-up action.  Statistics on the number of suspected speculation cases between April 2010 and October 2011 are at the Annex.  The statistics show that there has not been an increasing trend regarding the suspected speculation of properties in the form of share transfers of Hong Kong "property holding companies" since the introduction of SSD.

(a), (g) and (h) I will give a consolidated response to parts (a), (g) and (h) of the question which are about the real estate agency sector.  The number of estate agency business operators, salesperson licence holders and estate agent (individual) licence holders may change as a result of various different factors.  According to the information provided by the Estate Agents Authority (EAA), on June 22, 2011 when the Stamp Duty (Amendment) (No.2) Bill 2010 (the Bill) was passed by the Legislative Council, there were 4 361 estate agency business operators(Note)  and 32 961 individual licensees (including holders of salesperson licences and estate agent (individual) licences) in Hong Kong.  There were 4 517 estate agency business operators and 34 644 individual licensees on October 31, 2011.

     EAA is a financially independent and self-financing statutory body.  Licence fees are its main source of income.  EAA is of the view that, as past experience shows, licence fee concessions will bring financial pressure to EAA.  Having considered all relevant factors, EAA has no plan to introduce any licence fee concession at the moment.

     On the fees charged for the property record searching services provided by the Land Registry (LR), LR advised that as it was required by the Trading Funds Ordinance to be self-sustainable, it would not be feasible to reduce the fees in the short term.  It is worth noting that LR reduced the fees per property search from $15 to $10 in 2005, and significantly reduced the application fee and minimum deposit for its Online Services Subscriber accounts in 2006 and 2009 respectively.  On the whole, property record searching fees only constitute a very small portion of the operating costs of estate agency firms.

(e) and (f) When introducing SSD, the Government fully took into account the views of the public and the relevant sectors, including the estate agency sector, on combating short-term speculative activities to ensure the stable and healthy development of the property market.  Since the announcement of the introduction of SSD, the number of subsale cases has decreased substantially over the past year, which demonstrates the effectiveness of SSD in curbing short-term speculative activities.  We have no plan to review SSD at this stage.  During the scrutiny and debate of the Bill at the Legislative Council, we undertook to review SSD 24 months after the enactment of the Bill, or as circumstances require.

Note: EAA counts estate agency firms under a single group and chain shops as a single estate agency operator when working out the number of estate agency operators in Hong Kong.

Ends/Wednesday, November 23, 2011
Issued at HKT 12:38


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