Hong Kong scraps property tightening measures to boost economic recovery
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[February 28, 2024] By
Clare Jim and James Pomfret
HONG KONG (Reuters) -Hong Kong announced major measures on Wednesday to
bolster its flagging real estate market by scrapping all tightening
measures for residential properties, aimed at helping the city's economy
which is expected to grow at a tepid 2.5%-3.5% this year.
The financial hub will cancel all additional stamp duties on
transactions imposed in the past decade in a bid to boost the city's
depressed real estate market, Financial Secretary Paul Chan told
lawmakers in his annual budget.
Noting challenges including high interest rates, a complex geopolitical
environment as well as ballooning recent budget deficits, Chan announced
a mix of measures spanning property, tourism and financial services to
lure back capital, businesses and visitors to the city, as well as
restore fiscal balance.
On property, long a key pillar of the economy, Chan said all demand-side
management measures for residential properties would be scrapped with
immediate effect.
"We consider that the relevant measures are no longer necessary amidst
the current economic and market conditions," Chan said.
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These include cutting all additional stamp duties for foreign buyers and
those for the purchase of second properties, as well as on those selling
flats within two years of buying them, that had been imposed in the
decade prior to the current slump to try to cool one of the world's
priciest property markets.
In a parallel move, the Hong Kong's Monetary Authority (HKMA) adjusted
measures for property mortgage loans, including raising the maximum
amount homebuyers and investors can borrow for some purchases.
Ricky Wong, vice-chairman at developer Wheelock Properties, said the
moves can "stimulate locals and overseas people to buy homes for their
own use and attract investors to re-enter the property investment
market."
The group would actively prepare for the launch of its new projects, he
added.
Hong Kong's housing prices have plunged 20% since their 2021 peak given
both economic and political headwinds, including a national security
clampdown that stoked an emigration wave from the city and a slowing
Chinese economy impacting potential Chinese home buyers -- long a driver
of the market.
PROPERTY AGENCY STOCKS SURGE
Hong Kong's property sub-index rose more than 2% on the news before
closing down 0.6%, compared with a 1.5% drop in the benchmark index.
Shares of Midland Realty, a real estate agency, surged as much as 44.6%,
while smaller rival Legend Upstar jumped as much as 16.5%.
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![](../images/022824PIX/busine1.jpg)
A woman walks in front of an under-construction residential
building, in Hong Kong, China, February 27, 2024. REUTERS/Tyrone Siu
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"It is believed that in the short term, it will stimulate the
trading volume, promote the recovery of the property market, restore
market confidence, and stabilize property prices," said Martin Wong,
Greater China head of research and consultancy at Knight Frank.
In a bid to curb smoking, the government increased tobacco taxes to
HK$0.80 per cigarette, bringing the cost of a pack to about HK$94
($12).
On Hong Kong's ballooning fiscal deficits, with the city running up
deficits for four of the past five years, Chan pledged to "adopt a
fiscal consolidation strategy to narrow our fiscal deficit
progressively towards achieving the goal of restoring fiscal
balance," though he didn't specify a timeframe.
Hong Kong posted a consolidated deficit of HK$101.6 billion for
fiscal 2023‑24, in line with market expectations, and a deficit of
HK$48.1 billion is forecast for the coming 2024/25, Chan said.
In fiscal 2022/23 Hong Kong posted a budget deficit of HK$122.3
billion ($15.63 billion) after taking into account the proceeds of
HK$66 billion received from issuance of green bonds.
The ratio of government debt to GDP will be in the range of 9-13%
from 2024‑25 to 2028‑29, Chan said.
The economy expanded by a sluggish 3.2% in 2023, hampered by
geopolitical tensions between China and the United States, while
capital flight turned the Hong Kong stock market into the worst
performing major index last year.
The government will roll out more than HK$1 billion ($127 million)
in support measures for its beleaguered tourism industry, to help
offset the impact from the struggling Chinese economy, which has
resulted in fewer visitors from the mainland.
The city will stage more than 80 "mega events" in the first half of
the year to boost tourism, including a monthly fireworks and drone
show at its panoramic Victoria Harbour.
($1 = 7.8260 Hong Kong dollars)
(Additional reporting by Anne Marie Roantree, Donny Kwok, Jessie
Pang and Dorothy Kam; writing by Farah Master and James Pomfret;
Editing by Himani Sarkar, Neil Fullick, Lincoln Feast and Kim
Coghill)
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