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Cityscape of skyscrapers at dusk as seen from Victoria Peak in Hong Kong.
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Shares in Hong Kong developers rose after Treasury Secretary Paul Chan scrapped property cooling measures to shore up the sector, which has been squeezed by high borrowing costs and weak business confidence.
In his budget speech on Wednesday, Mr Chan announced that Hong Kong would remove all buy-side tightening measures on residential real estate and immediately waive stamp duty on the transfer of REIT units.
Following the announcement, the Hang Seng Real Estate Index rose 2.4%, but has since fallen from its trading high, with the overall Hang Seng Real Estate Index down 1.47%. Shinsegae Development shares soared more than 8% before currently trading at 4%, while Esan Development added 0.3%. Sunfunkai Properties and CK Assets rose 1.35% and 0.55%, respectively, while Henderson Land Development traded 3.83% higher.
Hong Kong home prices, once the world’s most expensive, have fallen nearly 20% from their 2021 peak due to rising interest rates and weak market sentiment.
According to the city’s land registry, sales contracts for all building units in 2023 decreased by 2.7% from the previous year. Sales also decreased by nearly 40% compared to 2021. The government’s house price index also fell for the ninth consecutive month in January, dropping by 1.57%.
“With these stamp duty reductions, I think we will certainly see fairly quick collections and volumes,” Peter Churchius said. Managing director of Portwood Capital, a major real estate investment company. “And toward the end of the year, real estate prices may start to creep up.”
Until recently, the city levied a 7.5% stamp tax on non-permanent residents purchasing property and additional properties purchased by permanent residents. The rates for both taxes have been lowered from 15% in October.
Churchhouse added that this could be a “slightly positive reversal” for the broader Hong Kong stock market, as the market is highly correlated with the residential property market. Hong Kong’s stock market has fallen about 40% from its highs a few years ago.
“There may be some light at the end of the tunnel for the stock market,” he said.
Mr. Chan also suggested that there is more room to ease real estate lending policy. The Hong Kong Monetary Authority is expected to make an announcement on the same day.
Mr Chan added that this year’s economic growth rate is expected to be in the range of 2.5-3.5%.
The Hong Kong government has also committed more than HK$1 billion ($127 million) to support the tourism industry.
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