A report on residential sales performance in Hong Kong by Jones Lang LaSalle (JLL) revealed that the mass residential capital value index climbed 0.5 per cent over the last two months.
This indicates that the stamp duty hike of 15 per cent on all residential transactions has failed to curb the upward trend of residential property prices in the city.
The stamp duty hike on all residential transactions was expected to deter overseas and local investors from investing in the city. These barriers to entry are higher than any other global city in the world, including London, Paris, New York, Sydney, Singapore, Berlin and Vancouver.
From the December-released figures from the Land Registry, home sales decreased by 47.3 per cent to 3,550 in November from October levels following the announcement of the measure.
The aim, according to the Hong Kong government, is to cool an overheated market in terms of house prices. However, JLL pointed out that this can now be seen as a failure.
JLL’s Mass Residential Capital Value Index is now up 120 per cent since the Global Financial Crisis in 2008. This further raises the question as to whether such demand-suppression measures have had much effect in helping more people achieve home ownership.
Hong Kong officials say that expensive land premiums represent one of the biggest culprits behind high property prices. They have suggested that increasing land supply could help tackle this issue.
That said, the public land sales market has recently attracted greater interest from mainland Chinese contenders, whose participation in residential land sale tenders increased from 26 per cent in 2013 to 65 per cent in 2016.
With most new market entrants still willing to pay top-dollar to plant a flag in the city, the increased provision of land sites for sale may not be able to provide a relief to land prices in the immediate future.
“We expect there to be to be at least five new projects providing 3,900 flats released for sale after the Chinese New Year period,” said JLL’s regional director of capital markets Henry Mok.
“Some developers may adopt more restrained and competitive pricing strategies when the launches flood the market. With the focus to largely remain in the primary market, property sales in the secondary market will remain subdued owing to the lack of incentives to offset higher transaction costs,” he added.