Hong Kong Wen Wei Po (By Yan Lunle)
Recently, the Financial Secretary, Chen Maobo expressed, it was noticed that some buyers entered the market by self created first-time buyer identity, which made the market to speculate that the Government would make a move. How serious is the situation that buyers entry into the market by self created first-time buyer identity? An agent calculated the transaction that has at least one of the same name among buyer and seller as the internal transfer case, and found the number of internal transfer cases was 502, a new high in recent two years, even the second hand property transactions were recorded slightly down by month in May.
According to the Land Registry's information, the Hong Kong Data Research Centre of Q-Fang has recorded more than 5,000 second-hand residential property transactions in April and May, which had reappeared in six and a half years, and 5,336 transactions were made in May, slightly up by 1.2% month-on-month. However, while the volume of transactions is falling, the number of internal transfer cases is rising against the market, showing that there is an upward trend in the market for people to let themselves to become the first-time buyer through removing the name from joint ownership, which may become the reason for the Government to make moves in the future.
People remove the name from joint ownership to become first-time buyer and then buy house.
Q-Fang calculates the transaction that has at least one same name among buyer and seller as an internal transfer case, and recorded 502 internal transfer cases in May, up 3.29% by month after a successive of 3 months, also it is a new high since July 2017. The ratio of internal transfer cases to the total second-hand property transactions ended a three-month decline, rising from 8.6% in April to 9.3%. In fact, the second-hand property transactions in May had a significant decline on a monthly basis, if the number of such transactions and acquisitions cases is excluded.
There were still many multiply internal transfer cases, for example there was luxury homeowner who had internally transferred two luxury flats involving up to HKD63 million, and it is estimated that this luxury homeowner would have the chance to buy house as a first-time buyer later after removing the name from joint ownership last month.
In terms of amount, the total amount of the second-hand property transactions in May was more than HKD46.2 billion, up more than HKD2.6 billion or 6% by month. The second-hand property market continues to be prosperous, with the average transaction price also has risen for 4 months, from an average of each case at about HKD8.0738 million to about HKD8.6623 million, an increase of 9.9%, belong to quantity drops while price rises.
However, it is worth noting that the ratio of internal transfer transaction has increased, dragging down the overall second-hand transaction price. According to the statistics from Q-Fang, excluding the transactions of purchasing many houses at once, the average transaction price of non-internal transfer cases in May was HKD9.401 million, while the average transaction price of internal transfer cases was only HKD7.792, which was only 82.9% of the average price of non-internal transfer cases. To put it another way, if only calculates the non-internal transfer transactions, the average price in May rose from HKD8.455 million to HKD9.401 million, up sharply by 11.2% month-on-month.
The strict tax rate for non first-time buyer is 15%.
According to industry insiders, the difference in tax payable between the first-time buyer and the non-first-time buyer is very high, with the ad valorem stamp duty for the first-time buyer is HKD100 to 4.25% of the property price while the tax rate for the non-first-time buyer is 15%, therefore, many people owning property choose to removing the name from joint ownership to re-enter the market. The transactions in May mainly reflected the situation in April when the Sino-US trade war had not deteriorated and the market was optimistic on future, so many people owning property took the chance to buy more house, increasing the internal transfer transactions.
The managing director of Q-Fang Hong Kong, Chen Kunxing expresses, internal transactions rising against the leading market trend reflects the current invest sentiment was high, and the owners were optimistic about the future market; but owners’ attitude might be cautious as the Sino-US trade frictions intensified, the stock market showed significant adjustments, and even some large banks began to downgrade the residential property, so it is believed the second hand property transaction registrations may have significant decline this month, however it may above 4,000 cases.
Members suggested that it is necessary to freeze the first-time buyer identity for 5 years after the owner removing the name from joint ownership .
According to the information, the Financial Secretary Chen Maobo recently expressed, it was noticed that some buyers entered the market by self created first-time buyer identity. The market speculates that the Government would make a move. The Legislative Council Member, Xie Weiquan pointed out earlier that, although it is not an offense to self created first-time buyer identity through removing the name from joint ownership, but in disguised form it might encourage the powerful buyers to through unceasing removing the name from joint ownership before enter the market to avoid strict tax, so the Government suggested to clarify the the definition of the first-time buyer first, and at the same time to restrict the owner to enter the market as the first-time buyer for 5 years after removing the name from joint ownership.