Stocks of Hong Kong developers surged after Financial Secretary Paul Chan decided to abolish property cooling measures to revitalize the sector, which has been burdened by elevated borrowing costs and subdued economic sentiment.
During his budget speech on Wednesday, Chan disclosed that Hong Kong would eliminate all buy-side tightening measures for residential properties and waive stamp duties applicable to the transfer of REIT units with immediate effect.
The Hang Seng Property index soared by 2.4% in response to the announcement, albeit retracing from session highs thereafter, while the broader Hang Seng index experienced a 1.47% decline. New World Development shares surged by more than 8% initially, currently settling at 4%, and Hysan Development gained 0.3%. Sun Hung Kai Properties and CK Asset recorded increases of 1.35% and 0.55% respectively, whereas Henderson Land Development saw a 3.83% uptick.
Hong Kong’s housing prices, once the highest globally, have plummeted nearly 20% since reaching their pinnacle in 2021, propelled by escalating interest rates and subdued market sentiment.
The sale and purchase agreements for all building units in 2023 declined by 2.7% compared to the previous year, as reported by the city’s Land Registry. Additionally, sales were nearly 40% lower than in 2021. The government’s home price index also saw a decrease for the ninth consecutive month in January, dropping by 1.57%.
“With these reductions in stamp duty, I think we’ll see certainly a fairly quick pickup in transaction volumes,” commented Peter Churchouse, managing director of Portwood Capital, a leading real estate investment company. “Then towards the back end of the year, we might start to see a little bit of a pickup in property prices.”
Previously, the city had imposed a 7.5% stamp duty on non-permanent residents purchasing property, as well as on additional properties purchased by permanent residents. These rates for both levies were slashed from 15% in October.
Churchouse further noted that this change could “be a bit of a positive flip” for the broader Hong Kong stock market, which has been closely linked with the residential property market. Hong Kong’s stock markets have experienced a decline of around 40% from their highs a couple of years ago.
“We might see a little bit of light at the end of the stock market tunnel,” he remarked.
Chan also hinted at the possibility of further easing policies on property lending. Hong Kong’s Monetary Authority is expected to make announcements later in the day.
Chan expressed his expectation for the economy to grow within a range of 2.5% to 3.5% this year. In addition, Hong Kong’s government is rolling out over 1 billion Hong Kong dollars ($127 million) to support its tourism industry.
