Hong Kong residents queue up at a stand outside the Home Affairs Enquiry Centre in Wan Chai, Hong Kong, to get hard copies of the financial secretary’s budget speech on Feb 28, 2024.  (EDMOND TANG / CHINA DAILY)

Scrapping of all property cooling measures will bolster Hong Kong’s real estate market, analysts said on Wednesday after the city’s finance chief proposed in his budget speech to cancel all additional stamp duties on transactions and waive stamp duties payable on the transfer of real estate investment trust (REIT) units.

Amid falling property prices in recent months, there have been calls for the government to scrap the measures first introduced more than a decade ago to combat property speculation in the special administrative region.

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Welcoming the 2024-25 Budget delivered by Financial Secretary Paul Chan Mo-po, Marcos Chan, head of research at CBRE Hong Kong, said, “The government has responded to what the market has been asking for, by removing all the austerity measures from 13 years ago. 

“Scrapping the measures will allow businesses and non-permanent Hong Kong residents to purchase residential properties without paying extra duties,” he said, hoping that it would be seen as a positive move and would likely create positive momentum for the market.

He thinks any pick up in transaction volume will be gradual “as high borrowing rates remain a hurdle for many commercial investment activities – rental recovery and vacancy improvements remain key for a more sustainable recovery in investment demand”.

Scrapping the measures will allow businesses and non-permanent Hong Kong residents to purchase residential properties without paying extra duties.

Marcos Chan, Head of Research, CBRE Hong Kong

“Based on HKMA’s latest announcement, we believe the uplifting the LTV for commercial properties will potentially facilitate more refinancing activities and reduce the pressure on distressed sales.”

Patrick Wong, senior real estate analyst with Bloomberg Intelligence, said abolishing the extra stamp duties for investors and overseas buyers could breathe new life into Hong Kong home sales, including at leading developers Sun Hung Kai, CK Asset and Henderson Land, which plan to bring new residential projects to market in March. 

Annual new-home transactions could leap as much as 50 percent this year, recapturing the 10-year average of 16,000 units, he said, adding that others such as New World Development and Sino Land might fall in line if the former manage to bring out buyers.

Speaking about scrapping the property cooling measures, Mayer Brown real estate partner Wayne Cheng said sellers and buyers of residential properties are still required to pay ad valorem stamp duty (AVD) at Scale 2 rates, from $100 up to 4.25 percent of the consideration. The AVD rates for residential properties and non-residential properties transactions are now aligned.

Eddie Kwok, senior director, valuation and advisory services of CBRE Hong Kong said they expect the cancellation of all demand-side management measures for residential properties to bring a positive impact to the transaction volume with sentiment turning positive gradually. 

Stamp duty relaxation will encourage more incoming talents or non-local buyers and investors to enter the market, he said.

A general view from Victoria Peak shows Victoria Harbour and the skylines of Hong Kong Island (foreground) and the Kowloon district (background) on Feb 24, 2018. (SHAMIM ASHRAF / CHINA DAILY)

“We observed various developers announced their plans to launch new projects in 2024 after the Chinese New Year in anticipation of the cancellation, preparing to tap into the pent-up demand. We are positive primary sales may stay >1,000 units each month during Q2 2024, especially when developers are keen to offload their inventory.”

READ MORE: HK lawmakers call for removal of property cooling measures

After declining for nine consecutive months, the downward trend in residential prices likely pause and stabilize in the short term. 

Housing prices will be affected by interest rate movement and developer's pricing strategy in the medium term, he said, “Going forward, we expect there might be increasing homeowners surrendering their units (acquired in recent years) at price cuts, which may put pressure on residential price.”

Regarding the proposed allocation of HK$1.09 billion to support mega-events and other activities, Song Haiyan, associate dean and chair professor at the School of Hotel and Tourism Management at the Hong Kong Polytechnic University, said, “This is a very good decision.” 

“Hong Kong, once a shopping mecca, has seen its allure wane amid stiff competition from other shopping destinations. By hosting major events, the city is expected to attract a new type of tourist and diversify its tourism sector.”

Such initiatives, including major music concerts, sports events, and exhibitions, will significantly boost tourist arrivals and benefit Hong Kong’s tourism industry over the next three to five years,” he added.

Meanwhile, Mathias Woo Yan-wai, executive director of Zuni Icosahedron, an international experimental theater company, is skeptical about the effectiveness of the pyrotechnic and light shows in wooing tourists. 

He stressed the importance of creative ideas, which can showcase Hong Kong’s uniqueness, are essential for such shows, especially in the face of fierce competition from light shows in Chinese mainland cities. “Otherwise, it wastes Hong Kong’s resources, given the ballooned deficit,” he added.

Talking about opening up new capital sources and re-domiciliation mechanisms in Chan’s budget speech, Helen Wang, counsel in the corporate and securities practice at Mayer Brown, said the move to attract Middle East capital is to be expected but it remains to be seen how much of an impact the announcement has in the retail funds space.

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“Hong Kong fund structures already have re-domiciliation mechanisms in place and whilst removing red tape and making the re-domiciliation process easier certainly helps, fund sponsors still need a tangible and compelling reason to make the move in the first place,” she said.

“For open-ended fund companies, a continuation of the government grant scheme, which is set to expire on May 9, 2024, would help to attract fund managers to re-domicile and set up in Hong Kong.”

Ivan Chu Siu-lun, a member of the United Nations ESCAP Sustainable Business Network, critiqued the latest fiscal budget, labeling it as merely an extension of last year’s Policy Address without addressing the core issues plaguing Hong Kong’s hard-hit economy. 

“Some measures announced in the Budget, including hosting fireworks and drone shows, as well as implementing a tobacco tax, are likely to have minimal effects given the broader economic challenges,” he said.

He called on the SAR government to focus on investing in projects, wooing and cultivating talent, and attracting capital to drive economic growth.