The Hong Kong government’s measures to curb real estate prices are deterring existing homeowners from selling their properties, exacerbating a shortage of housing supply in the city, according to Jones Lang LaSalle Inc. (JLL:US)
The government should replace the extra tax imposed on all homes resold within three years after purchases with a capital gain tax, and scrap a February move to double stamp duty taxes on all properties, Joseph Tsang, Hong Kong-based managing director at the world’s second-biggest commercial realtor, said in a briefing today.
Home prices in the city have more than doubled since early 2009 to become the world’s highest, spurring a slew of government curbs as the risks of a property bubble increased. Hong Kong Chief Executive Leung Chun-ying said this month that the government will ignore pressure to remove the measures until there’s a steady supply of new homes.
The measures “are making it more costly to sell homes,” Tsang said. “Many people don’t realize housing supply not only comes from new units, but existing units as well. All the measures have done is stifling transactions and is not helping people to buy their own homes.”
Home transactions in Hong Kong fell for a third consecutive month in May, according to land registry figures. They dropped to 3,286 in December, the lowest since November 2008. Prices have dropped 1 percent from March, according to an index compiled by Centaline Property Agency Ltd.
Since 2010, the government has imposed measures, including various extra transaction taxes and higher minimum mortgage down payment requirement, to address concerns that housing is becoming unaffordable for the general public.
U.S. Federal Reserve Chairman Ben S. Bernanke yesterday signaled to investors that the central bank is prepared to begin phasing out its monetary easing programs later this year. Hong Kong’s interest rates track those of the U.S. because of the city’s currency peg.
“Even if we lift all cooling measures and do nothing, the housing market would fall,” said Tsang. “Interest rate is rising and the U.S. economy is strengthening. The Hong Kong housing market has reached the peak of the cycle.”
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