Hong Kong Property-Tax Rise Shakes Shares of Developers
07 November 2016 - 5:50PM
Dow Jones News
HONG KONG—Hong Kong property stocks slumped Monday after a
decision by the city's government late last week to increase
property taxes in an effort to cool a surging market.
The new measures, which will see the stamp duty on home
purchases by an individual or corporation almost double to 15% from
8.5%, are meant to tamp down prices that have risen nearly 9% this
year, the government said.
Hong Kong developers led the top decliners in morning trading,
with New World Development Co., Sun Hung Kai Properties Ltd. and
Wheelock & Co. each diving more than 9%. Henderson Land
Development Co., Sino Land Co., Kerry Properties Ltd. and Sino Land
Co. were all down more than 6%. The broader Hang Seng Index was up
0.5% by the middle of the day.
Hong Kong property prices, already among the world's most
expensive, have headed upward this year thanks to low mortgage
rates and rising interest from mainland Chinese buyers eager to
park their money in non-yuan denominated assets. The Chinese
currency has dropped 4.35% against the dollar this year.
Hong Kong Chief Executive Leung Chun-ying said Friday that
investment demand in the housing market had risen in the past few
months and the cooling measures were in part aimed to counter
this.
Analysts at Bank of America Merrill Lynch on Monday downgraded
their outlook for Hong Kong developers saying "the higher stamp
duty will likely impact about 25% of transactions and drive out
investors and some mainlanders (at least in the short term)." BAML
now forecasts a 5% drop in Hong Kong property prices in the next
six months.
High property prices have long been a flashpoint in Hong Kong, a
city of seven million that is part of China but has its own legal
and government system.
First-time home buyers who are also Hong Kong residents will be
exempt from the new tax rate, the government said.
Analysts expect the new tax measures to fuel reluctance on the
part of both buyers and sellers in the housing market, suppressing
volume and reducing liquidity.
For equity market investors, this should be a trigger for
profit-taking since property stocks have rallied over the past few
months on the back of strong sales, said Jonas Kan, head of Hong
Kong research at Daiwa Capital Markets.
Write to Anjie Zheng at Anjie.Zheng@wsj.com and Gregor Stuart
Hunter at gregor.hunter@wsj.com
(END) Dow Jones Newswires
November 07, 2016 01:35 ET (06:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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