Hong Kong slaps property tax to close loophole

Venus Wu and Twinnie Siu

(Edits first paragraph)

HONG KONG, April 11 (Reuters) - The Hong Kong government

said on Tuesday first-time home buyers purchasing more then one

flat at the same time would be subject to a 15 percent stamp

duty, the latest bid to cool property prices in one of the

world's most expensive real estate markets.

Home prices in Hong Kong have jumped 364 percent since 2003,

while the median monthly household income has risen just 61

percent, pushing home ownership out of reach for many.

Hong Kong last introduced property cooling measures in

November 2016, raising stamp duty on property transactions for

the first time in three years but the measures had little

impact.

"We should suppress three types of demand: speculative,

external, meaning buyers from outside Hong Kong, and also

investment demand," Hong Kong leader Leung Chun-ying told

reporters.

"The new proposal, which will take effect after midnight

tonight, is to ensure that people do not buy more than one unit

by using one legal document."

Leung said some buyers had been using one legal document to

buy multiple flats to skirt stamp duty on second homes, pushing

up prices across the board.

"If buyers use one legal document to buy more than one

residential flat, the relevant transaction will be taxed at 15

percent," he said.

Leung, who steps down in July after a five-year term, took

power in 2012 with a pledge to make housing more affordable, but

since then prices have hit fresh record highs.

He emphasized the government's efforts in raising housing

supply, while financial secretary Paul Chan said he expects the

potential supply of new flats in Hong Kong over the next three

to four years to exceed the December estimate of 94,000 units,

hitting a new high.

Beijing-backed incoming leader Carrie Lam has pledged to

tackle the city's housing problem, which is also a top concern

of many foreigners working in Hong Kong.

Lam's goal to cool the property market will be challenged by

the recent influx of Chinese capital snapping up some of the

city's best plots of lands at record-breaking prices.

Thomas Lam, senior director at property consultancy Knight

Frank, said the new measure would not have a big impact on

developers, but would give the average buyer more opportunities

to buy a flat.

"This measure does not have a big impact on the market, but

the government is sending a message to the market and to the

developers, telling them they do not encourage this (multiple)

transaction method," he said.

The relentless rise in home prices had prompted renewed

speculation that the government may impose more property

tightening measures such as curbs on multiple property purchases

at one time in order to puncture the trend.

The Chinese-ruled city has seen a sharp rise in the number

of first-time buyers purchasing multiple properties in one go to

avoid paying a levy, though these cases only take up 4.7 percent

of all transactions, Leung said.

Soaring property prices are in stark contrast to the

slowdown in the former British colony's overall economy, as

evident from flagging retail sales and sluggish economic growth.

(Additional reporting by Michelle Price; Writing by Anne Marie

Roantree; Editing by Nick Macfie)