Tough new regulations drop property sales

Housing estate sales fall 15% over the weekend.

Midland Holdings Ltd., Hong Kong’s biggest publicly traded real estate firm, said residential property sales plummeted after the sales tax was doubled on property costing more than HK$2 million.

Under the new regulations, property deals below HK$2 million will be levied a stamp duty of 1.5% of the purchase price from HK$100. The measures took effect Feb. 23.

Local permanent residents who don’t own homes will be exempted. Buyers of non-residential properties will be required to pay stamp duties when they sign the purchase agreement.

Hong Kong has the world’s highest shop rents, the world’s most expensive apartments and the world’s second-most expensive place to rent office space.

“The property market bubble risks have only increased and not decreased,” said Hong Kong Financial Secretary John Tsang.

“If we allow the risk to continue to expand, ultimately it will affect the macroeconomic and financial system’s stability. The destructive power on society will be considerably large. The price of non-residential property has also soared.”

On Feb. 22, the Hong Kong Monetary Authority said it will tighten mortgage terms for commercial properties and parking spaces. It last tightened mortgage lending in September after saying the U.S. Federal Reserve’s quantitative easing risks pushing up home prices that are already higher than their October 1997 peak.

It was the third set of property curbs to cool the city’s real estate market since Chief Executive Leung Chun-ying took office in July 2012. Home prices have doubled in the past four years on near-record low mortgage rates, an influx of mainland Chinese buyers and a lack of new supply.