On Feb 19, LegCo began second reading of the Stamp Duty (Amendment) Bill 2012 (the Bill), consisting of the Special Stamp Duty (SSD) and the Buyer's Stamp Duty (BSD), and passed the bill on Feb 22. The bill had been in place as a drive measure prior to last month's third reading.

Anthony Cheung Bing-leung, the Secretary for Transport and Housing said that these special policies have proven effective in deterring speculation and suppressing property prices.

He added that the government is paying close attention to the market reaction, in case further measures are needed.

The Buyer's Stamp Duty, introduced in October 2012, requires a 15 percent tax on residential property acquired by any person (including a company) who is not a Hong Kong permanent resident. As a further curb on speculation, there is a Special Stamp Duty for any property resold within 36 months.

Buyers must pay an additional 8.5 percent Double Stamp Duty for property priced at more than HK$2 million. That doubles the previous duty of 4.25 percent. A LegCo committee then spent a year examining a draft law before giving it final approval.

In the 2014 Policy Address, the government said current curbs on the property market have had their desired effect. The government has set an overall residential supply target for the private sector of 13,600 apartments each year for the next five years, an increase of about 40 percent from the past five years.

The spokesman for the Transport and Housing Bureau said that the demand-side management measures, including the 2012 Bill and the doubled stamp duty announced in February 2013, have cooled the overheated property market and reversed the irrational expectation that property prices would only go up further.

"The government will continue to closely monitor the property market and consider adjusting demand-side management measures, or introduce suitable measures as and when necessary, to ensure the healthy and stable development of the property market," said the spokesman.

Ricky Poon of Colliers said that it is unlikely the government will remove duties in the short term, given that the property market has entered an adjustment phase. .

"We can see from the falling transaction data that the cooling measures are indeed effective. If the government cannot see an adjustment of price and demand in the market, the heavy duties will be retained for at least 12 months."

The property investment market has seen a marked drop in transaction volume as well, with the total volume for 2013 falling by 43 percent and considerations by 38 percent compared with 2012.

Lee from BNP Paribas, said that the double stamp duties have been effective for controlling non-resident purchases in Hong Kong. Otherwise, the property price would have increased by 30 percent in 2013 alone.

He added that these curbs can also prevent a precipitate drop in prices, when interest rates rise.

Meanwhile, he said that the government will not loosen its tight control on the property market. Letting go, he said, would merely bring another wave of outsiders into the pent up market and prices would take off again.

(HK Edition 03/07/2014 page4)