Hong kong property – now with 15 per cent added tax

Photo credit: Xopher Lance

Hong Kong has introduced a tax for foreign property buyers. The 15 per cent levy, announced at the end of October, is the latest attempt to cool down its real estate market as officials fear a bubble.

And well they might. Prices of property in Hong Kong shot up by 20 per cent in the first nine months of 2012, overtaking the records set in 1997. Hong Kong's Financial Secretary attributed the cause to wealthy Chinese investors taking advantage of low interest rates and relaxed credit condition even amid the poor economic climate.

The new tax will apply to "all non-Hong Kong permanent residents and companies", reports The Telegraph, while stamp duty will apply to those selling property within 36 months of purchasing it.

Experts are sceptical, though, that the new measures will successfully lower property prices.

"The biggest impact of these measures will likely be seen in declining sales volumes rather than in any significant price correction," commented Barclays Capital property analyst Andrew Lawrence.

"It will probably reduce demand from the mainland by 15-20 percent, particularly for the high-end market," Jackson Wong, vice-president for Tanrich Securities, told CNBC.

"I think many are quite surprised by the severity of the 15 percent special duty, so many are taking profits on the sector, which has done very well this year so far."

"I'm not sure they want prices to fall too much - half of the people (in Hong Kong) own property. Prices have been up around 15 percent year-to-date, they will be happy if we unwound all of that, but I'm not sure if we'll get prices down that much," added Michael Spencer, chief economist at Deutsche Bank.