Hong Kong Said to Plan Property Curbs; Stocks Decline
Nov. 19 (Bloomberg) -- Hong Kong's government plans new measures to cool the property market that will be related to the stamp duty imposed on home sales, a person familiar with the situation said today. Developers' shares declined.
Financial Secretary John Tsang is holding a press conference at 4:30 p.m., according to a government statement. The statement didn't say what Tsang will talk about. Norman Chan, who heads the city's central bank, will hold a separate briefing at 5:30 p.m., according to an advisory from the government.
The city's home prices have climbed about 50 percent since the start of last year, surpassing a 1997 peak that was followed by a six-year deflationary slump. Chan has said the U.S. Federal Reserve's expanded monetary stimulus may spur inflows of cash into Hong Kong, where a currency peg to the dollar prevents officials from raising interest rates to cool demand.
"As long as Hong Kong's currency remains pegged to the dollar, there's nothing much the government can do to contain property price gains," said Pauline Dan, Hong Kong-based chief investment officer at Samsung Invest Trust, which oversees about $72.1 billion in assets. "What can they really do? Perhaps raise stamp duty to increase transaction costs. At the end of the day, they want developers to push up volume because they want to see increasing supply."
The Hang Seng Property Index was headed for its biggest drop in three months. The gauge, which tracks Hong Kong's seven biggest developers including Sun Hung Kai Properties Ltd., fell as much as 2.6 percent, the most since Aug. 16, and traded 1.1 percent lower as of 3:13 p.m. in Hong Kong.
Shares Fall
Sun Hung Kai, the world's biggest developer by market value, lost 0.7 percent to HK$134.60, while Cheung Kong (Holdings) Ltd., controlled by the city's richest man, Li Ka-shing, declined 2.1 percent to HK$121.20
This year, the government has raised stamp duties on some home sales, increased down-payment ratios, stopped offering residency to foreigners who buy property in the city and increased land auctions to boost supply to curb home prices, which have surpassed a 1997 peak on the back of record-low mortgage rates and an influx of mainland Chinese buyers.
"Every time the government introduces new measures it will somehow slow down the rise in property prices," said Wong Leung-sing, a research director at Centaline Property Agency Ltd., Hong Kong's biggest privately held real-estate brokerage. "But after that slight pause, as long as interest rates stay low, prices will start going up again."
The International Monetary Fund said in a report yesterday Hong Kong's accelerating asset inflation risks causing a bust that leads to deflation and an extended economic "downturn," and urged further measures to rein in prices.
'Same Boat'
Hong Kong is in "the same boat" as other Asian economies as inflows of money put upward pressure on property and consumer prices, Chan said in comments on the HKMA website on Nov. 4. The Fed has announced a plan to buy an additional $600 billion in government debt to support the economy, a policy Fed Chairman Ben S. Bernanke said in prepared remarks to a conference later today in Frankfurt would ultimately support emerging markets as growth revives in developed economies.
The U.S. monetary policy action, known as quantitative easing, has prompted governments from South Korea to Brazil to act to stem fund inflows into their higher-yielding markets. South Korea revived a tax on foreigners investing in its bonds yesterday, Thailand is ending foreigners' 15 percent tax exemption on income from domestic bonds, while Brazil tripled a tax on purchases of local fixed-income assets by overseas investors.
Bank of Taiwan, the unit of the island's biggest financial services company, today cut the amount of loans for buyers of luxury homes and property investors as the state-owned lender seeks to reduce credit risk.
Tightening Rules
The Hong Kong on Aug. 13 tightened mortgage lending rules on luxury and investment properties and pledged to increase land supply. Down payments for apartments costing HK$12 million or more and for investment properties were raised to 40 percent, from 30 percent.
Home prices have since risen 5 percent, according to Centaline.
Hong Kong Chief Executive Donald Tsang said in his Oct. 13 policy address the government will stop offering residency to foreigners who buy property in the city and increased land auctions to boost supply.
Residential property prices will likely post a further 30 percent gain by the end of 2011, Credit Suisse Group AG said in a report this month. Buyers from China are fueling demand for luxury properties, such as the homes in Sheung Shui, near the Shenzhen border, that Sun Hung Kai has been selling since October.
To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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