Property market jitters possible amid uncertainty over law to double stamp duty
Uncertainty over legislation risks weakening market confidence, warn industry observers
Property owners are set to be disappointed if they think the delay in passing legislation to enact a doubling of stamp duty will cause prices to rise.
The extra stamp duty has been collected on transactions since February last year, but will not be paid to the government until it is enshrined in law.
"If the bill cannot be passed this year, this will not have any practical impact on the market," said Cusson Leung, head of property research at investment bank JP Morgan. He said the government would continue to chase the tax even if the bill was not passed this year.
The Legislative Council is expected to vote on the bill and an amendment by legislator Kenneth Leung by tomorrow. Under Leung's amendment, companies that hold on to properties for more than three years would get a refund of the extra stamp duty if the properties were used for their own business.
The amendment, which the government was once confident would be vetoed by the legislature, may now only need one more vote from geographical- constituency lawmakers to pass after radical group People Power said it might make a U-turn and back the amendment.
"I believe the lawmakers and parties who support the amendment have good intentions, but those good intentions might not necessarily lead to a good outcome," he wrote on his blog yesterday.
The government estimated the legislature would need about 30 hours to scrutinise the bill. So far members have spent only about four hours deliberating it. The Legco session has only 22 hours left before the legislature breaks off for the summer recess.
Thomas Lam, head of valuation and consultancy at international property consultant Knight Frank, said: "The current market is a policy market, and is not affected only by demand and supply and mortgage rates."
Lam said the extra stamp duty was announced more than a year ago, and any delay in passing the legislation would affect investor and buyer confidence.
The legislation would double the stamp duty on purchases of all property valued at more than HK$2 million. It would not apply to first-time buyers. People who sold their only home and signed a preliminary contract to buy a new one within six months could get a refund of the extra duty.
The government announced a concession in May that would give people in the latter situation more time to complete their purchase and avoid having to pay the doubled duty.
This would give buyers of secondhand flats an additional one to two months to complete a deal. Buyers of new homes would have up to three years to sell their flat and complete the purchase without paying the doubled duty because developers can offer new homes for pre-sale up to 21/2 years before building work is finished.
Charles Chan, managing director at Savills valuation and professional services, said it was highly likely the bill would be passed.
"If the bill is not passed, the non-residential market will see a surge in prices and sales," said Chan. That was because pent-up demand suppressed for more than a year would be released. "But if the bill is just delayed, I do not see there is much impact on the market," he said.
The government is understood to have secured enough votes to pass the legislation.
Commercial property transactions fell by 60 per cent, to 2,777, in the first half of the year, from 7,096 in the same period last year. The total value of commercial transactions plunged to HK$38.7 billion, from HK$79.85 billion in the same period last year, according to agents.
Sales of pre-occupied homes fell from April last year to about 3,000 a month because of the doubling of stamp duty, but by last month had rebounded to more than 5,000, thanks partly to the concession announced in May.
