The Hong Kong government’s recent tightening of stamp duty loopholes will have a negligible impact on residential markets, as the new rule only applies to only 5% of all residential transactions, according to a JLL report released Thursday.
The Hong Kong government announced on April 11 that effective the following day, first-time local home buyers purchasing multiple properties in a single transaction would be subject to a 15% stamp duty.
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"No more than 5% of property transactions have been affected by this new stamp duty regime, and it will unlikely affect future transaction volumes," Henry Mok, regional director of capital markets at JLL, said in the report.
Last November, Hong Kong introduced its 15% stamp duty across the board on non-resident and investment buyers, but local first-time homebuyers were exempted. Since then, there have been reports that buyers were using this loophole to avoid the tax burden by grouping multiple properties into one transaction.
"Despite the government’s close scrutiny on the market, demand-side suppression measure implemented so far have not been able to prevent prices from trending higher," Mr. Mok said.
At the end of March, JLL Hong Kong Mass Residential Index, which measures the price trend, increased 14.5% year-over-year. In absolute numbers, there were 5,856 residential transactions in March representing a total value of HK$50.4 billion (about US$6.5 billion), increasing 241% from February.
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Backed by a line-up of large-scale new developments ready for launch in the coming months and a recent pickup in the resale market, residential transactions for the full year could exceed the level of 54,700 sales recorded in 2016, according to Ingrid Cheh, senior manager of research at JLL.
"Unless there are drastic changes to the financing environment or other external shocks, we should continue to see mass residential prices flying higher, in the range of up 10%-15% in 2017, an upgrade from our previous forecast," Mr. Cheh said. Earlier this year, JLL predicted that home prices could rise 5% in 2017.
Hong Kong was ranked the second most expensive city in the world in a recent Savills report, with home prices averaging almost $4,000 per square foot.