Critics call a proposed stamp duty targeting speculation in Hong Kong’s overheated property market unconstitutional, and claim it hurts struggling homeowners and deters investors. But proponents – and the IMF – insist that Hong Kong must head off a real estate bubble that could sink the city’s economy, and officials are unlikely to withdraw the planned tax. See the following article from Property Wire for more on this.
Hong Kong should drop plans to impose new taxes on short term property sales to avoid damaging the city’s reputation as a free market, it is claimed.
In recent months the Hong Kong government has intensified measures to curb surging real estate prices with additional taxes and policies after the International Monetary Fund warned that asset inflation may derail the city’s economy.
Under the new measures, properties resold within six months to 12 months will incur an extra 10% stamp duty, while those resold between 12 months and 24 months will be charged 5%. The levy will be split between buyers and sellers.
The bill to impose the additional stamp duty requires approval by the Legislative Council before it becomes effective. Now pressure is building to reverse the measures.
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The stamp duty should be abolished, according to shareholder activist and Hong Kong based publisher David Webb. ‘The government needs to stand back and let the whole thing burst. That’s the proper way of handling a bubble,’ he said.
‘The stamp duty is going to hit a lot of unintended victims. During a downturn people who can’t pay their mortgage will have to sell something they bought six months ago and take a loss,’ he added.
Webb said he believes that the stamp duty increase goes against Hong Kong’s Basic Law, the mini-constitution put in place to govern the city when Britain returned its former colony to China in 1997. ‘It says you have a right to own, acquire and dispose of a property. If you start restricting the right of disposal, you’re restricting a constitutional right,’ he said.
Webb’s criticism of the measure follows comments by Mark McCombe, the local head of HSBC Holdings, the city’s biggest bank by deposits and customers. McCombe said in an interview last month any additional government measures to cool gains in property prices would run the risk of crimping demand among real buyers as well as property speculators.
But there seems to be little appetite among officials for a change. ‘As a responsible government, we can’t stand by and watch a property bubble forming. The stamp duty shouldn’t affect genuine homebuyers and long term investors, who’re unlikely to sell their flats over a 24 month period,’ said Leo Law, a spokesman for the government’s Transport and Housing Bureau.
James To, a legislator from the Democratic Party who is also the chairman of the bills committee on the stamp duty, said his party supports the use of additional taxes to curb speculation.
‘The proposed tax rate is a bit on the high side but it’s still acceptable. We still need to work out details including whether we should make this a permanent law or whether we should grant exemption to special circumstances, such as buyers who can prove that they need the money for medical emergencies,’ he explained.
Some experts say that the new tax could result in prices falling by up to 35%. According to Centaline Property Agency prices have risen more than 55% since early 2009.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.