Bigger, bolder steps should be taken to help homeowners switch flats

Homeowners switch flats change houses

The Legislative Council has recently passed a construction amendment bill that finally offers some much-needed adjustment to the rigid and ineffective cooling measures — a gesture that benefits ordinary homeseekers who are struggling to purchase a place that they can call their own.

The amendment bill enables authorities to impose a fixed 15% tax on non-first-time homebuyers, further raising the cost for property purchases that aren’t intended for self-occupation. But will it be strong enough to deter investors with deep pockets? I think that will depend on the price of the unit. It appears that properties valued under HK$2 million are most affected by the levy hike, which has gone from the previous 1.5% to 15%, a very significant increase. However, at present, a parking lot in Hong Kong costs over HK$1 million, so it’s virtually impossible to find flats at the HK$2 million price point. However, the biggest concern is probably units valued at around HK$6 million, whose stamp duty will increase by over half a million with the new bill. Of course, savvy investors are unlikely to be willing to take such a big loss. Plus, as U.S. President Donald Trump’s economic plan remains unclear, there have been growing concerns in the global economy, making many investors choosing to stay put for the time being, with some planning on establishing their moves for after the Lunar New Year. With the absence of cunning investors, the real estate market will be dominated by those looking to buy homes for personal use in the future, thus sales are expected to slow down. There are different opinions on the speculation of a minor post-Lunar New Year sales bump in the market. For those that are seeking property for personal use and are forking out a substantial amount of money on rent every month, it’s worth shopping around while the market is calm as there’s room for price negotiation — maybe you will find something you love during this transition.

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>> Legislative Council passed the Stamp Duty Amendment Bill

While elevated stamp duty forces a large number of investors to take a back seat, the Legislative Council also passed an amendment that extends the stamp duty exemption period to 12 months, meaning that the buyer of a second flat can obtain a full rebate if they offload their first flat within 12 months of the new property being bought. By allowing more time, this policy is intended to make it less stressful for homeowners to change flats and thus encourage them to do so. Nevertheless, I think it’s likely that it will be significantly less effective than it is expected to be, because the only beneficiaries of the rebate period extension are homeowners who are already well-heeled and therefore can use the extension to sit on their old flat and hopefully get a better price for it. However, most homeowners don’t have such luxury and will have to sell their home as soon as possible to afford an upgrade. Thus, the extension won’t mean much to most families.

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