Source: Securities Times Author: Haolin
Behind the continuing boom in the Hong Kong property market, a “secret path” of illegal funds has surfaced.
On February 28, the Financial Secretary of the Hong Kong Special Administrative Region Government, Mr Chan Mao-po, announced the abolition of all residential property demand management measures when announcing the 2024/2025 fiscal year. The Hong Kong property market has once again entered the “zero-spicy” era after many years. On April 10, the “Stamp Duty (Amendment) Bill 2024” was passed in the third reading in the Legislative Council of the Hong Kong Special Administrative Region. Hong Kong residential property transactions are no longer required to pay additional stamp duty, buyer stamp duty and new residential stamp duty.
In recent times, the performance of the Hong Kong property market has continued to be booming. Due to the drastic reduction in the threshold for buying a home in Hong Kong, many mainland buyers have returned to the Hong Kong property market. Behind this, the use of large amounts of foreign exchange to buy houses is still subject to regulatory restrictions, and “secret channels” of illegal funds have surfaced, and there are many risks behind it.
“Other methods” hide risks
Chan Yu (pseudonym) has been a bit busy lately trying to make up a down payment of HK$4 million.
For most mainland buyers, the first “hurdle” to buy a home in Hong Kong is how to transfer funds. Even if you can apply for a bank loan in Hong Kong, you must first resolve the down payment issue. During the interview, the reporter discovered that many real estate agency managers provide so-called “alternative methods” to “transport” funds to Hong Kong, but there are hidden risks.
Chen Yu told reporters that she recently had an interest in a new house on Hong Kong Island in Hong Kong. After communicating with a local bank in Hong Kong, she must first make a down payment of about 30%, or about HK$4 million. “In order to buy a house in Hong Kong, many buyers have actually begun preparations a long time ago, such as what some intermediaries call 'underground money shops'.”
At Shenzhen's Luohu Port, the reporter communicated with an “underground money store” manager. The other party told them that currently there are two main ways to “transfer” funds into Hong Kong. “One is that we are here to directly help you deposit money into your Hong Kong account. You pay us RMB in Shenzhen, which is a so-called 'double knock' method. However, we need to charge a handling fee, which generally ranges from 6 to 5 per 1000, depending on the amount and difficulty of the funds.”
“Another method is to ask water riders to carry over the cash in installments. Generally, they charge 200 yuan to 300 yuan in 10,000 yuan in cash, also known as 'ant moving'.” The manager continued. Chen Yu also said that recently, she also heard that it is not uncommon for families to drag their family and friends into Hong Kong with bank notes.
According to public information, according to sections 54 and 55 of the “Current Account Foreign Exchange Business Guidelines (2020 Edition)” (hereinafter referred to as the “Foreign Exchange Guidelines”), individual settlements and domestic personal foreign exchange purchases are managed in annual facilitation amounts. The facilitation amounts are equivalent to 50,000 US dollars per person per year; individuals can use their valid ID to process foreign exchange purchases and settlements within the bank's annual facilitation limit. In addition to restrictions on annual facilitation amounts, there are also strict restrictions on the use of funds.
Wang Yuchen, director of the Beijing Financial Litigation Law Firm, said that if money is not transferred through formal and legal channels, on the one hand, you may face illegal problems, and you may be prosecuted for related responsibilities. On the other hand, if there is a problem with the relevant channels, you may also face financial losses. However, institutions or personnel engaged in this illegal trade in foreign exchange for profit may be involved in criminal offenses. Once discovered, it is not only a matter of fines, but they may also be imprisoned.
New home sales are booming
Meanwhile, in Hong Kong, some developers also make it easier for mainland buyers to apply for loans. A sales manager for a new housing project in Hong Kong told reporters that the company is communicating with local banks. For eligible mainland buyers, the project and bank can provide the same loan ratio as local residents in Hong Kong, that is, 90 percent of the loan.
Regarding the question of whether mainland customers can borrow a mortgage in the process of applying for a mortgage at the Bank of Hong Kong, a local bank staff in Hong Kong told the reporter that regardless of whether all or part of the fixed income of mainland customers comes from the mainland, it can theoretically be used to apply for a Hong Kong bank mortgage. However, in terms of approval, it is relatively strict. The details are still subject to different banks. It is recommended to ask the bank or a mortgage specialist before applying.
“I'm afraid it's too late.” Chen Yu told the reporter that several new housing projects she is interested in have recently opened, and sales are very hot.
After the complete “elimination” of the Hong Kong property market, developers are also speeding up the market. Recently, news of hot sales has come from many new housing projects in Hong Kong. The “Blue Coast” project developed by Changshi Group in collaboration with the MTR Corporation opened for the first time and sold nearly 422 suites. According to public market information, the sale cashed out nearly HK$7.5 billion, setting a record for the highest sales amount of a new listing in a single day since Hong Kong's “First-hand Residential Property Sales Regulations” were implemented in April 2013.
According to monitoring data from Midland Property, new housing transactions in Hong Kong increased 14.5 times month-on-month to around 4,200 units in March, hitting a monthly high since 1998. Second-hand housing sold about 5,000 units, an increase of nearly 85% over the previous month. Chairman Wong Kin-yep of the Associated Press Group said that the “withdrawal” is a turning point for the Hong Kong property market and will help rebuild Hong Kong people's confidence in the economic prospects and property market. If Hong Kong's economy improves significantly, housing prices are expected to rise by 5% this year. Midland Properties anticipates that the share of mainland buyers buying properties in Hong Kong may rise further to 25%, driven by the “anti-corruption” effect.
edit/lambor