Friday, November 19, 2010

Not all Governments are Stupid

Today I was struck by this Bloomberg story about Hong Kong's forthright efforts to cool down it's overheating property market.

Hong Kong imposed additional taxes and raised down payments on residential properties, stepping up a battle against surging prices after the International Monetary Fund warned that asset inflation may derail the city’s economy. 
Let's look at some of the details:
Homes sold within six months of purchase will incur a 15 percent stamp duty from tomorrow, Financial Secretary John Tsang said in a briefing today. Down payments for homes costing HK$12 million ($1.5 million) or more will rise to 50 percent, from 40 percent. Down payments for homes costing between HK$8 million and HK$12 million will be increased to 40 percent from 30 percent, Hong Kong Monetary Authority Chief Executive Norman Chan said...The maximum loan to value for all non-owner occupied residential properties and those held by companies will be lowered to 50 percent, Chan said.

I'd like to repeat that last sentence.  If you want to buy an investment property, be prepared to put down at least 50% in a deposit. Meanwhile in Australia, a quick look at the home loan section of several Aussie bank's websites shows me that I can still buy an investment property at a 100% LTV, pay interest only for 5 years, and then refinance when my property is presumably worth 50% more. What could possibly go wrong??

Meanwhile, the Victorian coalition opposition is vowing to abolish stamp duty, our Federal government appears to be concocting a hairbrained scheme to backstop the RMBS market, and the RBA continues to deny that we have a housing bubble in Australia.

Good times.

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