Moves by the Hong Kong
administration to curb red-hot property prices by doubling stamp duty and
imposing a tax on buyers should be reviewed, as they discourage foreign
investors from entering the commercial sector, according to the Royal
Institution of Chartered Surveyors.

To highlight the strong pace of price growth in Hong Kong,
figures for the first quarter of 2013 from Knight Frank, the real estate
advisors, showed that Hong Kong recorded the largest rise on an annual basis
(up by 28 per cent) while prices in China rose the most on a quarterly basis
(up by 10.7 per cent). Globally, house prices rose 6.6 per cent in the
year to March. “Mainstream property prices in Hong Kong and China look to
be flouting the efforts of policymakers to cool their property markets; both
recorded price rises in the first quarter despite a raft of measures to kerb
escalating prices,” Knight Frank said.

And RICS is concerned that policymakers’ methods are not
working and may even aggravate the situation.

“RICS is of the opinion that the policies should be reviewed
as they undermine Hong Kong's global
competitiveness,” the organisation, which represents a large chunk of the
region’s property sector, said.

“Many institutional investors regard Hong Kong's corporate
real estate as an attractive long-term investment tool, and many multi-national
companies often choose Hong Kong as their
entry point into the Asian and mainland Chinese markets,” it said.

The organisation argued that the buyer’s stamp duty sends
out a “negative signal” to overseas investors and will hit the jurisdiction’s
competitiveness.

“Hong Kong's CBD [central
business district] is already one of the most expensive office markets in the
world. Many multinational corporations will also look to purchase their own
premises for staff accommodation. If property prices and rental levels are
driven too high, Hong Kong may stand to lose its position as the city of choice
for MNC's and investors looking to find opportunity in Asia,”
it said.

“The doubling of stamp duty effectively prevents overseas
investors from entering Hong Kong's commercial
real estate market. As less overseas investors and MNC's come to Hong Kong, the only possible outcome is that prices will
inflate even faster. Without sufficient rental competition, rental price levels
are unlikely to fall to a satisfactory level, and MNCs will become discouraged
from starting businesses in Hong Kong,” it
said.

“RICS has made clear that the government has access to
useful supply-side tools that can combat high purchase and rental prices of Hong Kong's commercial properties. While the government
is now acting to increase home supply, RICS suggests that the government pay
closer attention to the supply of commercial properties and formulate policies
that carefully consider the importance of Hong Kong's
international competitiveness,” it said.

As a short-term measure, RICS said they government should
consider introducing a form of exemption to non-speculative acquisitions of
non-residential property, or abolishing buyer’s stamp duty for commercial
properties.