17 November 2018
John Tsang, CY Leung and Anthony Cheung (inset, left to right) are shown at a press conference on Friday announcing an incease in double stamp duty. Photos: HKEJ
John Tsang, CY Leung and Anthony Cheung (inset, left to right) are shown at a press conference on Friday announcing an incease in double stamp duty. Photos: HKEJ

Welcome to first-time homebuyers

When God has His church, the devil will have his chapel.

Substitute “God” with “government” and “church” with “housing policy” and you get a snapshot of the property market.

On Friday, the government unexpectedly raised the double stamp duty to 15 per cent on property transactions for non-first-time buyers to cool the surging home market.

The annnouncement was made by Chief Executive Leung Chung-ying, Financial Secretary John Tsang and housing chief Anthony Cheung. 

The tax is expected to kill the stamina of investors — especially mainlanders who are wary of yuan depreciation but now pay 30 per cent tax (15 per cent each for special stamp duty for non-locals and the new double stamp duty) on the home price. But this only gives rise to a new group of buyers.

At least four first-time buyers took advantage of their special status to snap up four flats in one go because there is no limit to the number of units one can buy on their first purchase.

According to the Hong Kong Economic Journal, a local buyer paid HK$19.93 million (US$2.57 million) for four small units at the Mets, a Ma On Shan project developed by Wang On Properties.

The buyer paid HK$750,000 for the standard 3.75 percent stamp duty and virtually “saved” HK$1.6 million under the new tax measure.

Likewise, two other buyers paid between HK$22 million and HK$23 million for two units at Man Tin Heights, a small but luxury residential project by Kerry Properties.

Another buyer paid HK$30.36 million for four small units in Napa, a Wheelock Properties project in Tuen Mun. It is reported that the buyer financed her daughter, a first-time buyer.

Midland Realty’s residential chief executive Sammy Po anticipated that some parents would use their children’s name for property investment.

“Many would use this special once-in-a-lifetime offer to their maximum benefit,” Po said.

Shares of Midland Realty fell 10 per cent in early morning trading but its 70 per cent-owned subsidiary, Midland IC&I, was up 10 per cent because the new tax does not apply to commercial transactions.

It is funny how a change in property rules can affect family dynamic in Hong Kong and China.

In Hong Kong, it has become quite common for a married couple to separate joint ownership if they want a second flat because that can save them from the double stamp duty.

In China, some couples might pretend to be divorced to enjoy the special mortgage arrangement.

Recently, Shanghai restricted homebuyers to use their children, parents — and especially their ex-husband or ex-wife — to pay the mortgage loan together in a move to control the surging property market.

A friend of mine who has been actively buying homes since 2009 recently bought a couple of flats for HK$30 million in his niece’s name.

I asked one of them how they feel about having their biggest investment in a relative name and here’s the reply: “I do not like it, too, but I dont know how I could save over HK$2 million in taxes.”

My friend also needs to find a way to compensate his niece, who gave up her own rights.

The idea of children buying flats on behalf of their parents is not for the faint-hearted.

Many parents I know would want their children to go through the same cycle as they did — working and saving hard before landing their dream home.

To buy or not to buy is always a tough question.

For Hong Kong parents, the question remains social and financial — when do you start to trust your kids?

Many would probably say, “not until they get their first flat”.

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EJ Insight writer

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