International Finance: Hong Kong Taps Brakes On Property
HONG KONG -- John Tsang, Hong Kong's financial secretary, warning against an "increased risk of a bubble forming in the property market," raised taxes on luxury-home transactions and announced plans to loosen its land-auction policies.</br></br>The measures elicited mixed reactions, with some critics saying they didn't go far enough in addressing a growing problem. Stock investors shrugged off the comments Wednesday, pushing shares of property developers higher even as the broader market weakened.</br></br>Residential property prices soared nearly 30% last year due to an influx of foreign funds and ultra-low interest rates. Hong Kong, with its freely convertible currency, has become a magnet for foreign investors looking to capitalize on growth in mainland China, which maintains strict foreign-exchange controls.</br></br>Mr. Tsang said Wednesday that the government will raise the transaction tax on luxury apartments valued at more than HK$20 million, or US$2.6 million, to 4.25%, from 3.75%, warning that officials would extend the tax to the mass market "if there is excessive speculation in the trading of these properties." He also said the government would tinker with its land-auction system to increase land supply for residential development.</br></br>Lau Kwok-yu, a professor at the City University of Hong Kong specializing in housing policy, said that the housing policy measures announced Wednesday were very "modest" and "limited." "The only thing I can say for certain is that the measures aren't going to meet the needs of the mid-to-low end of the market," Mr. Lau said.