The latest cooling measures did not do much to cool down demand; instead HK recorded the highest price paid for an apartment in Asia days after the clampdown was announced.
Just 3 days after the Hong Kong government doubled the residential stamp duty to 15% for non-first home buyers and 30% for foreign buyers, the most expensive apartments in Asia were sold to a Hong Kong property tycoon.
The 2 adjoining luxury apartments at the Mount Nicholson development in Victoria Peak fetched HK$104,803 (USD13,514) per sq ft making them the most expensive apartments in Asia. Both units, occupying a combined 8,702 sq ft of space cost a total of HKD912 mil (USD117 mil).
The buyer is believed to be billionaire Edwin Leong Siu-hung, chairman and founder of property developer Tai Hung Fai Enterprise. With a net worth of US$3.9 bil, he is ranked 17th among Hong Kong’s 50 richest people tin 2016, according to Forbes.
The new rules which took effect on 5th November had obviously not affected super high-end properties. The previous world record set was HK$103,762 (USD13,380) per sq ft for an apartment in Mid-Levels, Hong Kong. Market observers believe the recent sales were made to children of rich families who did not previously own any properties, thus circumventing the rule.
Around the same time, another buyer purchased four apartments for a lump sum of HK$19.93 mil. By lumping all four units under one agreement, the buyer — who doesn’t own any other property and hence was considered a first-time buyer — was able to avoid the new stamp duty. His savings? About HK$1.6 mil, according to agents.
The new rule treats multiple residential properties as one single transaction as long as they are contained within a single instrument. As seen, for buyers who are determined, two loopholes as described above have already been utilised, thanks to eagle-eyed lawyers – either get non-property owners to buy on their behalf or buy several properties under one transaction.
Observers have noted that the additional levies will affect investors buying small to medium-sized units and not the super rich who are more concerned about the prestigious location and the quality of the project.
As a result of the restrictions, HK home prices in general are predicted to decline by 5- 8% in the next 3 months. More HK buyers are also looking overseas with the United Kingdom receiving more enquiries post-Brexit due to the Sterling’s depreciation. Non-traditional property hotspots like Germany and France are also targeting HK investors.
On the other hand, mainland Chinese real estate capital flows into Hong Kong continue to rise. Mainland Chinese investors have invested a total of HKD 16,959 mil into commercial properties in Hong Kong from January to October 2016, according to data from JLL.
Among the notable Hong Kong purchase by Chinese investors was Chung Kei Group’s purchase of Hong Kong’s One Harbourgate East Tower for US$580 mil.
“Chinese investment overseas has been in line with the government’s ‘Go Global’ policy. Besides yields, the quality of the asset matters to a Chinese investor. An asset with good visibility and branding, notably those in Central Hong Kong, is highly sought after,” says a representative from JLL.
Going forward in 2017, unless the Hong Kong government comes out with even more stringent cooling measures, it looks like the ‘Fragrant Harbour’ (meaning of Hong Kong in Cantonese) will continue to record more and more record-breaking transactions especially from Chinese investors. – Benjamin Yong