HONG KONG—Hong Kong's government on Friday took some of its toughest measures yet to cool the city's red-hot real-estate market by significantly raising transaction costs for speculators.
Financial Secretary John Tsang said the moves, which include additional stamp duties for properties sold within two years of purchase as well as lower mortgage ratios, underscore the government's commitment to ensuring stability in Hong Kong's property market as apartment prices continue to soar amid ample liquidity and rock-bottom interest rates.
Property prices are now near the peak they reached before the last property bubble in 1997, with average home prices up 15% between January and September, following a 30% jump in 2009. The government has over the past year introduced a number of cooling measures, such as increasing land supply and temporarily excluding the use of real-estate purchases in an investment immigration program, but has achieved mixed results.
"The unusual surge in flat prices has attracted speculators. This, coupled with quantitative easing measures, has distorted the market expectation regarding inflation and asset prices," said Mr. Tsang. "Unscrupulous speculators may take advantage of the heated market sentiments to lure people into buying beyond their means."
Mr. Tsang said increases in asset prices and overheated speculative activities bring a "heightened risk of property bubbles forming," justifying the need for additional measures to rein in the private housing market.
He added that he will launch more measures if necessary to cool the property market.
Among the measures announced Friday are additional stamp duties, or property transaction taxes, on properties sold within two years of their purchase.
If a property is re-sold within six months, the government will levy a charge of 15% of the transaction price that is jointly payable by both the buyer and seller. The government will impose a 10% charge for apartments sold between six and 12 months of their purchase, and a 5% charge for those sold between 12 months and 24 months of purchase.
The new duties, which take effect Saturday, are in addition to existing stamp duties of as much as 4.25% of property sales prices.
"This is the toughest move ever as compared with the previous measures that will likely curb speculation effectively in the short-to-medium term," said Kevin Lai, a senior economist at Daiwa Capital Markets.
To further contain speculation and lending in the property sector, the Hong Kong Monetary Authority on Friday told banks to lower the ceiling on mortgages for residential properties valued at 12 million Hong Kong dollars (US$1.55 million) and higher to 50% of the property's value from 60%, with immediate effect.
The mortgage ratio for residential properties valued between HK$8 million and HK$12 million will also be cut 10 percentage points to 60%, HKMA Chief Executive Norman Chan said. The ratio for properties valued below HK$8 million will remain unchanged at 70%.
Nomura analyst Paul Louie said the government's measures were "very significant" and "much harsher and more punitive than the market had expected."
He said the tougher rules could result in a 40% drop in transaction volumes of private secondary apartments and, with many speculators out of the picture, stabilize prices in the near term.
Donna Kwok, greater China economist at HSBC, said Hong Kong authorities are limited to administrative measures to counter the inflationary risk prompted by the latest round of quantitative monetary policy easing proposed by the U.S. Federal Reserve this month. "The [government] can't erect capital controls without jeopardizing the stability of its financial sector, which is pinned upon the free movement of capital and drives one quarter of its economy," she said.
"This is the most creative and carefully crafted move from the HK authorities since 2009 for tinkering with demand-side factors in the property market, because the scope of motive has been widened," Ms. Kwok added. "As a result, this latest set of measures will likely have the biggest and most lasting impact that we've seen yet for cooling Hong Kong property prices."
The latest property-cooling measures come after the International Monetary Fund on Thursday urged the Hong Kong government to take further action on the real-estate market if asset-price inflation continues. The IMF said it sees increasing risk of a property bubble in Hong Kong due to continued liquidity inflows and low interest rates coupled with tight housing supply.
However, James Cheung, a director at Centaline Surveyors, said that while the increased stamp duty will likely have an immediate effect on speculation, the longer-term impact on prices is less clear given the market practice of passing taxes on to the buyer.
"If demand remains strong, owners who have held their properties for over two years may have room to increase the price, as there will be higher demand for their property, which is not subject to the high taxes," Mr. Cheung said.—Kate O'Keeffe, Fiona Law and Shai Oster contributed to this article.