In Hong Kong

Tax loophole plugged for multiple-unit buys

HONG KONG • Hong Kong's government has tightened property rules for the second time since November, to shut a loophole that grants investors buying multiple units at one go lower tax rates.

First-time home buyers acquiring more than one property in a single contract will now be charged the same 15 per cent stamp duty that applies to a second purchase, rather than the 4.25 per cent duty for first-time buyers.

The change, announced late on Tuesday by Hong Kong Chief Executive Leung Chun Ying, took effect at midnight.

"Though buying multiple flats in one contract accounts for a small proportion of residential apartment transactions, there's a noticeable increasing trend," Mr Leung said. "This doesn't only go against the government's goal to clamp down investor demand through the new stamp duty, it also fuels the property market sentiment."

Hong Kong's leaders are seeking to address a gap that allowed the richest buyers to take advantage of rules intended to help first-time home buyers as they face rising discontent over wealth inequality and skyrocketing housing costs.

The previous attempt to rein in the market in November did little to cool demand, with prices setting new records this year in the world's least affordable market.

Existing home prices have reached record highs, according to the Centaline Property Centa-City Leading Index. Even after the United States Federal Reserve raised interest rates, a move that presages higher mortgage rates, developers have seen brisk sales.

Cheung Kong Property Holdings last week offered 40 sq m flats in east Hong Kong island for at least HK$10.3 million (S$1.86 million), Apple Daily reported. The amount could buy a two-bedroom, inner-city Sydney apartment with a carpark space, according to property website Domain.com.

Hong Kong's de-facto central bank on Monday expressed concern about the riskiness of mortgages issued by developers with high loan-to-valuation ratios.

The accumulation of these mortgages may change the risk-profile of developers to which banks may have exposure, said Mr Raymond Chan, executive director of banking supervision at the Hong Kong Monetary Authority (HKMA).

He added that HKMA may ask banks to take further steps to manage their exposure to the sector.

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A version of this article appeared in the print edition of The Straits Times on April 13, 2017, with the headline 'Tax loophole plugged for multiple-unit buys'. Print Edition | Subscribe