By James Pomfret and Clare Jim
HONG KONG (Reuters) – Hong Kong is expected to announce lower stamp duties for some property transactions in an annual policy statement on Wednesday that will focus on stabilising an economy hurt by mass emigration from the city and economic weakness on the mainland.
Speaking a day before he was due to present policy plans to the legislature, Hong Kong Chief Executive John Lee said the focus would be on stimulating the economy and improving people’s livelihoods.
For the property market – a major pillar of the economy – local media say Lee is expected to trim stamp duties for some, but not all property transactions.
The business community and home-owners want the government to roll back decade-long cooling measures that aimed to curb speculative activities in one of the world’s priciest markets.
Home prices surged nearly 300% in the decade to 2019, when Hong Kong was rocked by anti-government mass protests, the COVID pandemic, and a subsequent braindrain of hundreds of thousands of people amid a national security crackdown.
Since then home prices have fallen 13%, amid rising interest rates and a bleak economic outlook.
In August, property prices dropped to a seven-month low, and realtors expect them to end 2023 as much as 5% down.
Transaction volumes have shrunk in both the luxury and broader markets, reflecting weak sentiment, with the number of residential mortgage loans in negative equity cases expected to rise above 10,000 in September, approaching an 18-year high recorded in the fourth quarter of last year.
“Even if the government reviews and relaxes certain stamp duty measures in the future, although this may bring stability and restore some confidence among potential buyers during the downward cycle, we believe that property prices will continue to fluctuate for a while,” said Rosanna Tang, Hong Kong head of research at Cushman & Wakefield, a property consultancy.
Hong Kong’s economy is expected to grow 4% this year after contracting 3.5% in 2022.
Last year, Lee announced measures to attract top international talent to the city. These schemes have had some success, but applicants have been mostly from mainland China.
Hong Kong, like mainland China, is also facing a demographic challenge with falling birth-rates. Local media reported Lee might offer a cash bonus for babies born to one local parent.
Lee, who was sanctioned by the U.S. government for his role in cracking down on freedoms, is also expected to emphasize the importance of maintaining a tight national security grip – a priority for Chinese leader Xi Jinping.
Despite Hong Kong’s attempts to restore the city’s international reputation and lure more capital, further security legislation including anti-espionage laws are expected to be enacted in the near term.
Some Western governments have criticised the ongoing national security clamp down, which has led to the imprisonment of many opposition democrats and closure of liberal media outlets.
($1 = 7.8229 Hong Kong dollars)
(Additional reporting by Jessie Pang; Donny Kwok; Editing by Anne Marie Roantree and Simon Cameron-Moore)