Hong Kong took the brakes off its property market Wednesday, easing key duties on purchases implemented over a decade ago to cool the territory's red-hot real estate prices and prioritize local families over foreigners and investors. File photo by Jerome Favre/EPA-EFE
Oct. 25 (UPI) -- Hong Kong took the brakes off its property market Wednesday, easing key duties on purchases implemented over a decade ago to cool the territory's red-hot real estate prices and prioritize local families over foreigners and investors.
The measures, including cutting the period during which buyers incur a 10% tax for flipping a property from three to two years and halving to 7.5% stamp duty on locals who buy additional properties and purchases of non-permanent residents, were announced in a policy speech to lawmakers by Hong Kong Chief Executive John Lee.
Stamp duty on foreign residents' first property will be suspended pending an application for permanent residency. They will be billed for the relevant sum if their application is unsuccessful or they fail to apply.
The aim was to retain "foreign talent" as future permanent residents of Hong Kong, a government source told Hong Kong Free Press.
"Considering all factors that affect the real estate market, we think there's room for easing the 'spicy measures,' but the principle is to ensure the healthy development of the real estate market, and balance the risk of property speculation," they said.
Lee said the arrangement would "help alleviate the financial burden on Hong Kong Permanent Residents who have already owned residential properties in their acquisition of another residential property, as well as reduce the costs of non-permanent residents in their acquisition of residential properties."
Realtors were skeptical of the intervention in a market that saw home prices fall for four straight months and the housing price index at 339.2 in August, down 7.9% compared with August 2022, and 4.2% below its peak in April.
"The relaxation of cooling measures is only a band-aid solution that is unlikely to reverse the downward trend of home prices," said JLL property consultancy chairman Joseph Chang.
Property agency Centaline said just 8,792 new home sales were recorded in the 9 months to September with 11,000 projected for the full year, the second-lowest in almost 10 years. In 2022, transactions volumes hit a decade-low 45,050
Prices fell 15% in 2022, recovering only about 2% of the loss by the end of July, according to Financial Secretary Paul Chan Mo-po.
HSBC said home prices would drop by 5% in the first six months of 2024 before leveling off in the second half.
The changes were accompanied by other economic stimulus and social measures including cutting the stamp duty of share transactions from 0.13% to 0.10% to reverse declining trading volumes in the stock market, a $2,557 check for newborns with one parent with three years' permanent residency, and raising the tax-free income threshold for parents to $15,341.
