In Hong Kong, an increase in the share price of local developers was recorded after Financial Secretary Paul Chan announced the cancellation of measures to cool property as part of efforts to normalize the state of affairs in the real estate sector, which found itself in a difficult situation amid the impact of negative factors such as high borrowing costs and economic sentiment containing little faith in improvements in the for the foreseeable future.
On Wednesday, February 28, Paul Chan in his speech on the budget stated the termination of all decisions forming the system of tightening the conditions for the purchase of residential real estate. He also said that in Hong Kong, stamp duty fees payable upon transfer of REIT facilities are being canceled.
The mentioned measures were taken as part of efforts aimed at countering the emergence of a property bubble. Paul Chan said on Wednesday that appropriate decisions are no longer necessary in the context of the current economic and market conditions.
Strict measures were introduced in 2010. At that time, the Hong Kong authorities sought to contain excessive activity in the real estate market, which was in a state symbolically characterized as incandescent. In 2010, the property became something like a basic factor in the development of the local economy. The authorities at that time were concerned that prices in the real estate market were rising above those limits that were reasonable and sustainable. It is worth noting that the property continues to be a kind of basic element of the Hong Kong economic system.
The Hang Seng Property index showed growth of 2.4% after Paul Chan announced the lifting of tightening measures. Then this indicator decreased moderately compared to the session highs. At the same time, the broader Hang Seng index showed a negative dynamic. In this case, a decrease of 1.47% is implied.
The share price of New World Development increased by more than 8% on the background of Paul Chan’s statements. Hysan Development securities rose 0.3%. The share prices of Sun Hung Kai Properties and CK Asset increased by 1.35% and 0.55%, respectively. Henderson Land Development securities rose by 3.83%.
The cost of housing in Hong Kong in the past has been what can be described as a kind of example of high cost. However, this indicator has been on a gradual downturn trajectory since its peak in 2021. Over the past three years, the cost of housing in Hong Kong has decreased by an average of 20%. In this case, factors influencing the dynamic indicator were circumstances such as rising interest rates and negative market sentiment.
Data from the Hong Kong Land Registry indicate that the number of purchase and sale agreements for all building units decreased by 2.7% last year compared with the result of 2022. Moreover, the figure for last year is almost 40% lower than the number of purchase and sale agreements for all buildings recorded in 2021.
The government’s home price index in January showed a decline, which is recorded for the ninth month in a row. This indicator fell by 1.57%.
Peter Churchhouse, managing director of Portwood Capital, a leading investment company in the sphere of real estate, says that reductions in stamp duty fees will contribute to a rapid increase in the number of deals in the relevant market. Also, in the context of reflections on the potential consequences of new decisions by the Hong Kong authorities, the expert admitted the possibility of a small increase in the value of the real estate towards the end of the current year.
The amount of stamp duty fees canceled this week was 7.5% from persons who, are not permanent residents, purchasing property, and from permanent residents who are buyers of additional properties. The rates of these fees were reduced from 15% in October.
Peter Churchhouse says that the decision of the Hong Kong authorities can be a kind of positive moment for the local stock markets as a whole. The expert explained his assumption by the fact that currently there is a high level of correlation between the mentioned commercial platforms and the residential real estate market. Hong Kong’s stock markets have fallen by about 40% over the past two years. The best period is still in the past, but it may happen again in the future. Peter Churchhouse admits the possibility that there will be some light at the end of the stock market tunnel at the end of 2024. The expert also announced an increase in the number of opportunities for easing the real estate lending policy. The media reports that the Hong Kong Monetary Authority will make statements on this matter shortly.
Peter Churchhouse also expects that in 2024 the Hong Kong economy will show growth in the range of 2.5% to 3.5%. The local government is taking measures to achieve the corresponding goal. For example, it was decided to allocate 127 million dollars to provide financial support to the Hong Kong tourism industry. This sphere of activity is of particular importance. For example, in 2019, the London-based research company Euromonitor International published a ranking of the most popular tourist cities in the world. Hong Kong has become the leader in this rating. In 2019, about 26.7 million tourists came here.
Hong Kong’s economy has suffered due to problems in the relevant area in mainland China and has faced such a negative circumstance as a record exodus of talent. Currently, there is a kind of desire to recover from quarantine due to the coronavirus, the consequences of which still continue to be a sensitive impact factor. In 2023, Hong Kong’s GDP grew by 3.2%. This result is largely due to the low base of 2022. After the cancellation of the mentioned quarantine at the beginning of last year, Hong Kong has recorded a boom in the sphere of tourism and a sharp increase in consumer activity, but the positive momentum lost its strength within a few months, without becoming a long-term trend. The efforts of the local authorities are aimed at resuming the intensive recovery process.
Currently, Hong Kong’s status as the financial center of Asia is under threat. The reason for the negative prospects is the intention of the local government to adopt a law on national security, which will limit the possibilities of foreign business. This legal initiative provides for a broad interpretation of the concept of foreign influence in the context of issues of protection of state interests, which is why a large space of action is being formed for the law enforcement system, including concerning business.
As we have reported earlier, Economists Worsen Hong Kong’s Growth Outlook.
