Hong Kong unveils more property-cooling measures

HONG KONG (Reuters) - Hong Kong is imposing higher stamp duties on property transactions, officials said on Friday, the latest effort to cool an overheated property sector that boasts some of the world's most expensive apartments.

Financial Secretary John Tsang said Hong Kong's property market "exuberance has regained momentum in January" and for this reason, stamp duties for flats would be increased across the board for most buyers.

He said the measures were needed to keep the potential economic risk from spreading.

"The risk of an asset bubble is increasing. If we allow the bubble to grow, in the end it will affect the macroeconomy and also the stability of the financial system. It will be very damaging to society," said Tsang.

For flats costing less than HK$2 million (about $258,000), the stamp duty would be increased from HK$100 to 1.5 percent of the transaction price, while the stamp duty for other properties would be doubled to as much as 8.5 percent of the residential transaction price.

The increased stamp duties, however, would not apply to Hong Kong residents buying residential property for the first time in the city, in a bid to allow new local homemakers to enter the market, while other limited exemptions were possible.

The government also said it would standardize the stamp duty regime for non-residential properties such as shops, factory space, office space and even car parking spaces to avoid speculative hot money flowing into these other categories.

"It will help forestall any possible shift in exuberance from the residential market to the non-residential market by raising the costs," said Tsang.

"These measures will help narrow the supply-demand gap, contribute to the stable development of our property market and the stability of our financial system," Tsang told reporters.

The city's ultra-low interest rate environment, tight supply and abundant liquidity, pushed property prices up 2 percent in January, Tsang said, while overall residential property prices have jumped 120 percent since 2008.

While Tsang said some of the market frothiness had come from hot money flows from the United States in response to quantitative easing and a low interest rate regime, this could change earlier than some people expect. That would cause mortgage repayments to balloon while "price fluctuation risks would be increased", he said.

The latest round of property cooling in Hong Kong comes on a series of seemingly tit-for-tat moves by the Singapore government that has also sought to rein in its own market.

As major centers of finance and trade, Singapore and Hong Kong are on the front line of global hot money flows. Each exports the equivalent of more than 100 percent of their GDP each year. They're not the only Asian countries confronting this problem. Others affected include South Korea, Thailand and even China.

Since October 2009, the Hong Kong government has taken a series of steps to curb prices, including a 15 percent property tax on foreign buyers, mortgage restrictions and taxes on quick resales. However, home-price pressures have continued to pose policy challenges for officials. ($1 = 7.7557 Hong Kong dollars)

(Reporting by Lee Chyen Yee, James Pomfret, Alison Leung, Anne-Marie Roantree and Christina Lo; Writing by James Pomfret; Editing by Ken Wills)