Housing demand from non-first time & overseas buyers drops sharply in Q1

Performance of private housing market increasingly reliant on local end-users

April 29, 2019

HONG KONG, 29 April 2019 – The proportion of home sales subject to Double Stamp Duty (DSD) and Buyer’s Stamp Duty (BSD) has dropped gradually over the past three years, suggesting that the bulk of buyers active in the market through the first few months of 2019 are local first-time homebuyers looking to get on the housing ladder, according to JLL’s latest Residential Sales Report.

According to the latest figures released from the Inland Revenue Department, the proportion of home sales subject to DSD dropped to a monthly average of 8% in the first quarter of this year, extending on the gradual decline recorded in the market in recent years. In 2016, about 28% of all home sales were subject to DSD. At the same time, the proportion of transactions subject to BSD also declined, down to an average of just 3% of total transactions in 2019 from 5% three years ago. DSD and BSD are levied on non-first time and foreign homebuyers, respectively, and can serve as a useful proxy for gauging participation rates of both buyer groups.

In an attempt to meet the increasing demand of first-time homebuyers, the Government aims to provide more public housing units in coming five years; around 26,300 subsidised sale flats (SSFs) and 74,200 public rental housing units in total.

Henry Mok, Senior Director of Capital Market at JLL, said: “We don’t believe that the additional units will be sufficient to satisfy the pent-up demand that has built up in the market over the past several years. Coupled with the fact that the construction of these new additional SSFs will take several years, market demand for smaller and more affordable housing units is likely to remain intact over the foreseeable future.”

Denis Ma, Head of Research at JLL, added: “Moving forward, developers are likely to build smaller units to minimise the risks arising from the looming vacancy tax. How well the private housing market performs through the remainder of 2019 and over next few years will very much depend on the performance of the local economy. Supply is unlikely to be a significant driver of market direction over the short term.”

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