The Effects of AVD Increase to Property Sellers and Buyers

In an attempt to suppress the surging property prices in the city, the Government of Hong Kong announced last Friday an increase of Ad Valorem Stamp Duty (AVD) to 15% for non first-time individual and corporate buyers. The measure took effect on 5th November, 2016

The Secretary of Transport and Housing Anthony Cheung pointed out that prices of small to medium residential property have gone up 8.9% during the months of March to September. However, Hong Kong permanent residents who are buying their first homes are exempted, and non-residential property transactions are excluded.

So what does this all mean to prospective residential property sellers and buyers?

For sellers who are eager to ‘get rid’ of their property, their strategy will be to slash prices to facilitate a speedier sale as transactions are expected to slow down since the announcement came out, and the effect is evident as some sellers decided to cut down prices this past weekend, while the majority might just take their property off the market and rather rent it out. With the cost of buying a property goes up, the demand and supply of second hand properties for sale will go down but this will in turn push up the demand and supply of rental properties and thus the cost of rental. Second hand properties transaction will be greatly affected overall.

>> Related Article: What is the Cost of Selling a Flat in Hong Kong?

As for investors, when the profit margin is getting narrow, they will think twice before making a purchase, so as the government has hoped for, it is anticipated that investment on the property market will slow and cool down, and property prices should steady or go down as a result. If fewer investors are willing to purchase properties, which means the supply of rental properties will decrease, hence push up the rent in near future.

First-Time Buyers
The beneficiaries of the AVD increase will definitely be first-time home buyers for they will finally have a chance to realise their dream and buy their first home without the need to compete with investors. Since developers of new developments tend to offer lucrative discounts, there is a huge likelihood that they will top up on the incentives and attract more first-time home buyers to choose new developments over second-hand properties.

>> Related Article: First Home Buyers – What to Look for

>> Search What You Can Buy in the First-Hand Market

For those who haven’t saved up enough to purchase their first home, be ready that your rent to be increased soon.

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