Opening remarks by FS at press conference (with video)

     The Financial Secretary, Mr John C Tsang, together with the Secretary for Financial Services and the Treasury, Professor K C Chan; the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung; the Commissioner of Inland Revenue, Mr Chu Yam-yuen; and the Government Economist, Mrs Helen Chan, held a press conference in the Auditorium, Central Government Offices, Tamar, today (February 22). Following are the opening remarks by the Financial Secretary at the press conference:

Ladies and gentlemen,

     Good afternoon.

     I shall now give you a summary of what I have just said.

     The Government has decided to launch a new round of demand-side management measures for both residential and non-residential properties. We hope that these measures will help narrow the supply-demand gap, and contribute to the stable development of our property market and the stability of our financial system.

     The Monetary Authority will be making an announcement concerning macro-prudential measures in the banking system after this press conference.

     In an environment of persistent, ultra-low interest rates and abundant liquidity, the local private property market continues to be exuberant. It has been dominated by a firm expectation that property prices will continue to increase. The risk of an asset bubble is increasing.

     In October last year, we introduced two measures. We increased the Special Stamp Duty, SSD, rate and extended its restriction period, and introduced the Buyer's Stamp Duty, the BSD. The two measures helped cool down the residential property market towards the end of 2012. Transactions in November and December 2012 plunged sharply as speculative activities and non-Hong Kong permanent residents' (HKPR) demand subsided.

      With the help of the enhanced SSD, short-term trading of residential property fell to only 245 cases in January 2013, as opposed to the long-term monthly average of some 1,500 cases over 1997 to 2010. BSD has also curtailed the non-Hong Kong permanent resident purchases of residential property. Their transactions plunged to just 318 cases in January 2013 or 4.5 per cent of total transactions, markedly below the monthly average of 1,089 cases or 13.6 per cent from January to October 2012.

     However, the market's exuberance has regained momentum in January this year. The property price increased by 2 per cent in January, and the momentum is continuing this month. In fact, prices have increased by 120 per cent compared to the recent trough in 2008. The affordability ratio has further deteriorated to 52 per cent in the fourth quarter of last year. Indeed, if interest rates were to go up by just three percentage points to a more normal level, the ratio would shoot up to 68 per cent.

     The price of non-residential property has also soared. In 2012, the price of retail space surged by 39 per cent, office space by 23 per cent and flatted factory space by 44 per cent. The number of transactions has also increased.

     These figures suggest to me that we need to introduce a new round of measures to further cool down the property market.

     I am announcing two demand-side management measures to reduce the immediate demand for both residential and non-residential properties.  

     First, we shall increase the cost of transactions generally by doubling across the board the rates of existing ad valorem stamp duty applicable to both residential and non-residential properties. For transactions valued $2 million or below, the stamp duty will increase from $100 to 1.5 per cent of the consideration of the transaction.

     We shall grant exemptions similar to those available in the existing SSD and BSD regimes. The new stamp duty rates will not apply to HKPR buyers who are not beneficial owners of any other residential property in Hong Kong at the time of acquisition of a residential property.

     Second, stamp duty is at present charged when a conveyance on sale of non-residential property is executed. We shall amend this arrangement so that stamp duty is charged on an agreement for sale and purchase of a non-residential property. This amendment will standardise the stamp duty regime for both residential and non-residential property transactions. I expect it will help forestall any possible shift in exuberance from the residential market to the non-residential market.

     These two measures will take effect after midnight tonight, that is February 23, 2013. Sale and purchase agreements signed today or before today are not affected. We shall introduce the necessary legislative amendments to the Legislative Council as soon as possible. I also hope that the Legislative Council will agree to empower me to adjust the value bands and rates of both the existing and new ad valorem stamp duty by means of subsidiary legislation so that adjustments can be made in a timely manner.

     The Government has resumed the land sale program since 2010 - well, we have resumed the government-initiated land sale programmes since 2010 - and housing supply will increase in the coming years. Some 48,000 unsold private flats were being built as of end-2012. We expect that some 24,000 new units will be ready for sale this year.

     I believe that the two new measures, together with the enhanced supply of flats, will help cool down the overheated property market. Maintaining a healthy, stable property market will be our ongoing endeavour. We shall continue to monitor the market closely, and I will not hesitate to introduce further measures when necessary.

     I shall now take a few questions from the floor.

Ends/Friday, February 22, 2013
Issued at HKT 19:07