The Budget maintains the same "hot measures" for the property market, but reduces the ad valorem stamp duty (second standard rate) for first-time buyers, which is a slight surprise to the market.
Among them, the first rate for a $3 million property is $100, which is $44,900 less than before the adjustment; for a $4 million property, it is $60,000 less than $30,000, and for an $8 million property, it is $240,000 less than $60,000.
The government pointed out that there are five indicators to monitor the property market, I believe that the reduction of the stamp duty for first-time buyers will not trigger speculation.
The industry believes that the reduction of stamp duty for first-time buyers will benefit properties under $10 million, which is conducive to increasing property transactions, but as the amount saved is small, it will not have a significant impact on property prices. This adjustment will also apply to non-residential properties.
In the past, the ad valorem stamp duty was only applicable to residential units valued at $2 million or below at $100, but the new budget extends the scope of application to units valued at $3 million or below.
As for flats valued at $4 million, the tax involved in the old system is $90,000, but under the new system it drops to $60,000, a 33% or $30,000 reduction. And the tax for an $8 million flat was $300,000 under the old system, but reduced by $60,000 or 20% to $240,000 under the new system.
Financial Secretary Paul Chan explained at a press conference yesterday that the adjustment of the ad valorem stamp duty on residential properties is to adjust Schedule II, that is, not for investment or offshore demand, but for people who do not own property, commonly known as first-time buyers.
He said that 90% of the property transactions last year were for first-time buyers, and most of them were small and medium-sized flats, so he hoped to ease their burden.
He added that he had already looked at the prices of the "first home" or "large and small (area)" flats, and that the stamp duty rate had not been revised for a long time (since 2010), so he decided to revise it to "reduce it a bit, so that it can be used for renovation costs".
In response to the impact on the property market, he said that the measure would not stimulate the property market, because at present, if you want to "short-term speculation" is required to pay additional stamp duty, and also said that the property market has been adjusted to a stable level, so it is more appropriate to make adjustments now.
Government sources added that after the adjustment of the tax bands, the tax on properties valued between $2 million and $10.08 million would be reduced, which is expected to benefit 37,000 buyers and cost the Government about $1.9 billion a year.
The source said the estimated number of beneficiaries was based on the number of property transactions last year, which was about 32,500 for residential properties and about 4,500 for non-residential properties. It was also revealed that property stamp duty revenue for 2021/22 will total $32.8 billion, compared to $13.8 billion in 2022/23, a 58% drop year-on-year.
As to why there is no "spice reduction", the government source said that the government has been closely monitoring the property market situation and observing it from five major aspects, including the speed and magnitude of changes in property prices, future supply, peripheral economy, property market atmosphere and transaction volume, stressing that the government is not set in stone and reiterated that there is no timetable for spice reduction, but will always monitor the market situation and adjust.
He also mentioned that the average transaction volume of the property market in the past two years was still similar to that in the 20 years after the introduction of the Spice Measures, and that the current mortgage expenditure of the public was high, with the percentage of median income for mortgage repayment still at a high level, therefore the residential property demand-side management measures were still considered effective and would not be withdrawn due to a single factor such as a drop in property prices or transaction volume.
The adjustment of the stamp duty scale is not a withdrawal of the measures, as it is not part of the demand-led scheme per se, but the adjustment is to help buyers to get on board, but the stimulus to the property market is limited.
He believes that the performance of the property market is more correlated with the interest rate, the government is not withdrawing the spice at this stage is the right approach, coupled with the government relaunched the investment immigration, the current environment rashly withdraw spice may not be suitable.
If the Government does, it should withdraw the Special Stamp Duty, so that owners can sell their properties for cash if they run into financial difficulties in the short term after buying them.
The Executive Director of Valuation and Advisory Services of Colliers Asia, Chow Yeuk Yu, also believes that the new measures will ease the burden of owner-occupiers and benefit small and medium-sized flats in remote and newly developed areas.
Although the government's intention is good, the amount of money saved is less than 1% of the property price, so the actual impact on property prices is not significant.
