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Budget 2023|The property price index fell by 15% last year. Is it time to "remove the spiciness"?

2023-01-27T23:09:45.983Z


"Take off the spiciness", "Take off the spiciness", "Take off the spiciness"—whether it is the public consultation on the "Policy Address" or the "Budget", there are always Hong Kong rulers shouting. After the Democratic League and the New Democratic Party made repeated moves to urge the government to cancel the property market


"Take off the spiciness", "Take off the spiciness", "Take off the spiciness"—whether it is the public consultation on the "Policy Address" or the "Budget", there are always Hong Kong rulers shouting.

After the Democratic League and the New Democratic Party have made repeated moves, urging the government to withdraw the "spicy trick" in the property market; just as the Rating and Valuation Department announced yesterday (January 27) that the property price index fell by more than 15% last year, the call for "withdrawal" Was fired again.

However, is the rationale for loosening the property market really in line with the current situation in Hong Kong?


Although the property price index fell by more than 15% last year, the overall property prices are still high, far beyond the affordability of ordinary citizens.

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The New Democratic Party of the Democratic League called "remove the spicy"

The Rating and Valuation Department announced the latest property price index yesterday, showing that the private property price index fell by 15.59% last year, ending the 13-year upward trend.

It is not difficult to predict that some vested interest groups have expressed their voices and called for the withdrawal of the property market as a "spicy trick".

Coincidentally, the New Democratic Party met with Financial Secretary Paul Chan on Thursday (January 26) and proposed to cancel the "double stamp duty" on housing.

The day before, the Democratic Federation held a parade of Chinese New Year floats, also urging the authorities to "remove the spiciness" as soon as possible.

At the beginning of this month (January 10), whether it was the "Budget" proposal submitted by the Democratic League, or the real estate and construction industry member Long Hanbiao of the Democratic League verbally questioned the Housing Secretary He Yongxian in the Legislative Council the next day, it was also three The sentence is inseparable from "removal of spicy".

In fact, as early as the middle of last month, the Democratic Federation had released a research report on "spicy tricks" in the real estate market, arguing that the real estate market had changed from "overheated" to "overcooled". "The increase, hindering second-hand transactions, increasing the risk of a "hard landing" in the property market, and affecting talent coming to Hong Kong.

Looking back, in August last year, Ye Liu Shuyi, the convener of the executive council of the New Democratic Party and a member of the Legislative Council, also raised similar views.

For these Hong Kong rulers, the property market's hot tricks are almost "harmful but not beneficial", and the drop in current property prices is a good opportunity to "get rid of the spicy". However, is the relevant statement really reasonable?

Long Hanbiao, member of the Legislative Council of the Democratic United Real Estate and Construction Industry, raised an oral question on "property market demand management measures", asking the government to withdraw the "property market hot tricks".

(Photo by Zhang Haowei)

What is the "spicy trick"?

"Hot tricks in the property market" include "spicy tricks in the real estate market" involving buying and selling properties, and "spicy mortgages" in the stress test of bank mortgages.

In terms of "hot property market", it mainly includes ad valorem stamp duty (AVD), buyer's stamp duty (BSD) and additional stamp duty (SSD) - AVD is divided into two types. Permanent residents need to pay 15% "Double Stamp Duty" (DSD, also known as "Non-First Home Stamp Duty"); Exemption, you only need to pay the "First Home Stamp Duty" with a maximum tax rate of 4.25%; while BSD is for all non-Hong Kong permanent residents and overseas company buyers, who are required to pay 15% tax according to the property transaction amount; as for SSD, the tax rate will be determined according to the time the seller holds the property before the sale, for example, 20% within 6 months of holding period, 15% within 6 months to 1 year, and 10% from 1 year to 3 years.

In terms of "Household Mortgage", buyers are required to pass the "stress test" before applying for a bank mortgage to buy a house. Banks mainly have two approval criteria to test whether the borrower has sufficient repayment ability: First, the payment and income The interest rate ratio (DTI) shall not be higher than 50%; second, assuming that the interest rate is raised at the current level, the DTI shall not exceed 60%.

Based on the calculation of a residential unit with a market value of 10 million yuan (see Table 1), if the buyer can pass the "hot property mortgage", then under the current "hot property market" - for Hong Kong permanent residents who are first-time home buyers, they only need to pay Pay 3.75% of the AVD of 375,000 yuan; for Hong Kong permanent residents who are not first home buyers, they must pay 15% of the DSD of 1.5 million yuan; as for non-Hong Kong permanent residents, they must pay 15% of the DSD and 15 % BSD, a total of 3 million yuan.

Drawing of "Hong Kong 01"

All harm but no benefit?

At first glance, the "hot property mortgage" has strict requirements, while the "hot property market" tax rate is not low; however, the former is expected to reduce the number of people who cannot repay loans and avoid a large number of bad debts, while the latter can help manage housing supply and demand—for first-time home buyers For Hong Kong permanent residents, non-first-time home buyers, and non-Hong Kong permanent residents, the tax rate gap is also very large. Among them, DSD and BSD mainly reduce the demand of non-Hong Kong permanent residents and those who have already bought homes, and SSD is to combat short-term speculation. .

Take the SSD launched in November 2010 for sellers as an example. Before that, a large amount of hot money flowed in and the property market was hot. From January to November 2010, the number of short-term resales accounted for 20% of the total number of transactions; and after the introduction of SSD , that is, from December 2010 to October 2012, the proportion of short-term resale cases decreased to 14.8%; the authorities later strengthened SSD in October 2012, and from November 2012 to December 2014, short-term resale cases The proportion of resale cases has been repeatedly reduced to 2.4%; until January to November 2022, the proportion of short-term resale cases remains at a low level of 0.9%, which shows that short-term speculation is no longer there.

As for the BSD introduced in October 2012 to reduce the demand for foreign buyers to purchase properties in Hong Kong, from January to October 2012 before the implementation of the policy, the number of residential property purchases involving non-local individuals and non-local companies accounted for the total number of transactions After the launch of BSD, from November 2012 to December 2014, the relevant proportion decreased to 2.1%; until January to November 2022, the number of related transactions also remained at a low level, accounting for 0.5% of the total transaction amount.

With the lifting of anti-epidemic measures in Hong Kong and the implementation of external and internal customs clearance, the local economy has begun to show signs of recovery, and the outside world is generally optimistic about the performance of the property market.

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Who can afford it?

However, neither the "hot property mortgage" nor the "hot property market" can stop property prices from rising.

Taking property price growth as an example, the average monthly increase from January 2009 to October 2012 was only 1.7% to an average monthly average of 0.8% from November 2012 to December 2014.

In April 2014, the property market heated up again and continued to be active. By December, the overall property price had risen by 14% from the low point in March of the same year, and was 61% higher than the peak in 1997.

If you look at the property price index, in 1999 as the base year, the property price index was 100 in that year, and it rose to 107.1 in January 2009; after that, after many years of continuous increase, it has been between 360 and 400 in the last two or three years floating between.

Until yesterday, even though the Department of Compensation and Estimation announced that the property price index in December 2022 was 332.5 points, which was a "new low in recent years", but it was still a "sky-high price", and it was even lower than the property price index in November 2010 before the introduction of SSD and other "spicy tricks". The price index was 163.7 - more than twice as high.

It is worth mentioning that before the introduction of "hot tricks", the median household income in the third quarter of 2010 was 18,100 yuan, and it will only rise by nearly 60% to 28,900 yuan in the same period in 2022. The increase cannot catch up with property prices increase.

Housing Secretary Ho Wing-yin also mentioned in the Legislative Council that the ratio of mortgage payments to the median private household income in the third quarter of 2022 (i.e. the housing affordability ratio) is still at a high level of 73%, much higher than in 2002 The 20-year long-term average through 2021 is 49%.

It can be seen that although the property price index fell by more than 15% last year, which was described by the Democratic League as "too cold", the overall property prices are still high, far beyond the affordability of ordinary citizens.

If the government hastily relaxes the "spicy tricks", the demand for entering the market will inevitably increase, property prices will skyrocket at any time, and rents will also surge accordingly. In the end, it may not benefit too many citizens who are able to buy homes, but it will certainly hurt the grassroots who are unable to improve their living environment.

In fact, as Hong Kong lifts the epidemic prevention measures and implements external and internal customs clearance, the local economy is beginning to show signs of recovery. The outside world is generally optimistic about the performance of the property market. Can rebound 3% to 5%.

The market is ready to go, is it time to "take off the heat"?

Source: hk1

All news articles on 2023-01-27

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