An urban view of skyscrapers at sunset seen from Victoria Peak in Hong Kong.
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Shares of Hong Kong developers rose after Financial Secretary Paul Chan scrapped property cooling measures in a bid to strengthen the sector, which has been weighed down by high financing costs and weak economic sentiment.
In his budget speech on Wednesday, Chan announced that Hong Kong will lift all restrictive buy-side measures for residential properties and waive stamp duty payable on the transfer of REIT units with immediate effect.
The Hang Seng Property Index jumped 2.4% after the announcement but has since slipped from session highs, while the broader Hang Seng Index fell 1.47%. Development of the New World shares rose more than 8% before currently trading at 4% and Hysan Development added 0.3%. Property of Sun Hung Kai AND CK resource increased by 1.35% and 0.55% respectively, while Henderson Land Development it traded up 3.83%.
Hong Kong house prices, once the most expensive in the world, have fallen nearly 20% from their 2021 peak on the back of rising interest rates and subdued market sentiment.
According to the city cadastre, in 2023 the purchase and sale contracts of all real estate units decreased by 2.7% compared to a year ago. Sales were also nearly 40% lower than in 2021. The government’s house price index also fell for the ninth consecutive month in January, falling 1.57%.
“With these stamp duty cuts, I think we will definitely see a fairly rapid recovery and transaction volumes,” Peter Churchouse said. CEO of Portwood Capital, a leading real estate investment firm. “Then, towards the end of the year, we may start to see a slight recovery in property prices.”
Until recently, the city imposed a 7.5% stamp duty on non-permanent residents purchasing property and on additional properties purchased by permanent residents. Rates for both levies have been reduced from 15% in October.
Churchouse added that this could “be a bit of a positive turn” for the broader Hong Kong stock market as it is highly correlated with the residential property market. Hong Kong stock markets have fallen about 40% from their highs a couple of years ago.
“We may be seeing some light at the end of the stock market tunnel,” he said.
Chan also signaled more room to ease home loan policies. The Hong Kong Monetary Authority will make announcements later in the day.
Chan added that he expects the economy to grow between 2.5% and 3.5% this year.
The Hong Kong government is also allocating more than HK$1 billion ($127 million) to support the tourism industry.