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ÔStrong dosage* needed to curb speculative activities and prevent property bubble

To cool down the overheated property market, the Financial Secretary Mr John Tsang announced a new round of measures to regulate supply and demand in the property market at the end of last month. The measures include raising the special stamp duty, extending the holding period of properties to 3 years, as well as an unprecedented buyer's stamp duty which will not be applicable to the permanent residents of Hong Kong. Under the circumstance of an overactive property market, a low interest rate and the influx of hot money, the risk of a property bubble in Hong Kong is looming. The strong dosage prescribed by the government to increase the cost of transaction, suppress demand, and curb speculative activities should help to maintain a healthy development of the market.

The market describes these measures to regulate the property market as a "strong dosage". While a certain degree of psychological pressure will be put on local prospective buyers, the inhibiting effect on foreign buyers and investors should be much more apparent. It is believed that property price adjustment will be seen in the short term. However, the government should solve the problem in the property market by tackling both the demand and supply. At the same time as it raises the stamp duty considerably to suppress demand, it must simultaneously increase the supply of land and formulate a clearly defined long term programme of land supply. By doing so, the government can then be able to secure public confidence and offset the anticipation of a rising trend in property price.

It should be noted that raising the special stamp duty, extending the holding period and introducing a buyer's stamp duty are special measures taken at special time. In particular, the introduction of a buyer's stamp duty which is targeted specifically at foreign investors actually amounts to a prohibition on lawful foreign investment in Hong Kong and it can be classified as "punitive duty". It contravenes the free market principle that Hong Kong has always emphasized. It will inevitably tarnish the image of Hong Kong as an international financial and trade centre, as well as weaken the competitiveness of Hong Kong in the international market. Therefore, as soon as the property price returns to a normal level, this special buyer's stamp duty should be withdrawn.¡@¡½Translation by Tung-ming tungming23@gmail.com

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