Shares of Hong Kong's real estate companies slumped yesterday as government plans to lift stamp duty on property transactions spooked investors and sparked a plunge in home sales over the weekend.
Analysts, however, believe the measures will not be adequate to stop a new wave of capital flowing into Hong Kong, and the city's property market will not see a turnaround in the medium to long run.
Property heavyweights Sun Hung Kai Properties, Cheung Kong (Holdings), New World Development and Sino Land each fell at least 3 per cent yesterday. The Hang Seng Property Index, which follows seven major locally listed developers, dropped 2.6 per cent, the most in three months. Midland Holdings, a real estate brokerage, plunged 17.4 per cent to HK$6.49, its largest drop in over a decade, according to Bloomberg.
Only 14 second-hand flats at 10 large housing estates such as Taikoo Shing on Hong Kong Island and Mei Foo Sun Chun in Kowloon sold over the weekend, down almost 80 per cent from the previous weekend.
The government's measures - seen as a move to prevent a property bubble in the wake of the US Federal Reserve's latest US$600 billion 'quantitative easing' - include additional stamp duty of up to 15 per cent on property speculation and a lower mortgage ratio for costlier flats.
'[The government] can cool the market for a few months but liquidity is the fundamental that the [Hong Kong] government cannot change,' said Goodwin Gaw, the founder of Gaw Capital. 'There is too much liquidity. Where can it go?' said Gaw, who expects to see sales volumes plunge but prices to correct only modestly. 'But it is a good move. At least, prices will stop rising.'
