In an unexpected announcement, the HK government issued further measures on Friday evening to curb the development of a real estate bubble and associated risks of financial instability.

The main changes are as follows:

– Properties transacted below HKD2M will now incur a stamp duty of 1.5% of transaction price (opposed to flat fee of HKD100).*

– Properties transacted above HKD2M will be subject to stamp duties double those previously in place (a maximum of 8.5%).*

– Non-residential properties will now be subject to stamp duties, and the mortgage-to-income ratio will be lowered from 50 to 40%.

– A person applying for a mortgage will have to pass a stress test to show he/she can afford mortgage payments should interest rates increase by up to 3%.

– Mortgages on car parks will now be capped at 40% and a repayment period of 15 years.

*Local first time home buyers will be exempt from the additional duties, as will locals selling their only home and buying a new one within 6 months.

Asking prices are expected to decrease to match the increase in additional stamp duty. Analysts and agencies are predicting a 50% drop in transactions in the coming months.

For more details, see:

http://www.scmp.com/news/hong-kong/article/1156301/hong-kong-unveils-more-property-cooling-measures

http://www.scmp.com/news/hong-kong/article/1156615/home-prices-expected-fall-5pc-next-month-stamp-duty-doubled

http://www.reuters.com/article/2013/02/22/hongkong-property-idUSL4N0BM4CE20130222?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FfinancialServicesRealEstateNews+%28News+%2F+US+%2F+Financial+Services+and+Real+Estate%29