Hong Kong scraps property tightening measures to boost economic recovery (updated)

Legend Upstar Holdings

28/02/2024 03:57

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      Stamp duties for home buyers to be scrapped
    

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      Analysts see rebound in property mkt, transaction volumes
    

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      2024 GDP seen growing 2.5%-3.5% versus 3.2% in 2023
    

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      HK$101.6 bln 2023-24 consolidated deficit, seem improving
    

  
 (Updates stock prices, adds developer comment and tobacco
taxes)
    By Clare Jim and James Pomfret
       HONG KONG, Feb 28 (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.
    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  .HSNP  rose more than 2%
on the news before closing down 0.6%, compared with a 1.5% drop
in the benchmark index  .HSI . Shares of Midland Realty
 1200.HK , a real estate agency, surged as much as 44.6%, while
smaller rival Legend Upstar  0459.HK  jumped as much as 16.5%.  
   
  
    "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)

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EXCERPTS-Hong Kong budget for fiscal 2024/25     urn:newsml:reuters.com:*:nL2N3FD0BR
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 (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)
 ((farah.master@thomsonreuters.com; +852 3462 7709;))