Sat. Jun 22nd, 2024

Hong Kong Chief Executive John Lee delivers his annual policy address to the Legislative Council on October 25, 2023.

Peter Parks | Afp | Getty Images

Hong Kong will slash buyers’ stamp duties for property buyers to help boost its struggling real estate sector, while reducing levies on stock trades in a bid to kickstart economic activity in the Asian financial hub.

This is the first time property cooling measures — in a variety of stamp duties known as “spicy policies” — will be relaxed effective Wednesday. They were first introduced in 2010 to curb red-hot property prices in a low interest rate environment.

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth, and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” Hong Kong Chief Executive John Lee said in his second annual policy address on Wednesday.

Hong Kong’s lukewarm post-Covid economic recovery has been accompanied by diminished stock trading volumes and sluggish residential transactional volumes in the territory’s once notoriously hot property sector.

Home prices in Hong Kong fell four months in a row. The official housing price index stood at 339.2 in August, down 7.9% from a year earlier and 4.2% lower from April peaks.

Among levies relaxed: the stamp duty that non-permanent residents have to pay for property and another levy imposed on additional properties purchases by residents will each be halved to 7.5%

Lee also announced a special stamp duty that was previously imposed on transactions involving property held for less than three years will now only apply to transactions for property held for less than two years. This levy amounts to 10% of the property price.

All stamp duties on property purchases will be suspended for new foreign talent, though that will be incumbent on the new residents obtaining permanent residency.

Reviving the Fragrant Harbor

Lee announced plans to reduce the stamp duty on stock transactions from the current 0.13% to 0.1% in a bid to boost trading volumes in Hong Kong, which have declined.

This reduction is part of several measures, including a review of stock trading spreads and market data prices to revive activity in one of Asia’s largest and most liquid stock markets.

On Wednesday, Lee unveiled broad ranging plans to bolster its shipping, aviation, technology, arbitration and exhibition sectors in the Hong Kong government’s attempts to boost the Chinese territory’s economic attractiveness.

Even as the city is returning to modest economic growth from a contraction last year, visitor numbers have yet to return to pre-Covid levels, contributing to anemic retail sales.

Stringent Covid curbs and the imposition of the National Security Act, which drew sharp international criticism, have hurt its global image and reputation as thousands have exited Hong Kong.

In July, Lee vowed to pursue eight pro-democracy activists “to the ends of the Earth” and “for life” after they were issued arrest warrants for alleged national security offences.

Still, he said Wednesday Hong Kong would enact additional security laws by the end of 2024, citing Article 23 in its Basic Law that empowers and obligates the Hong Kong Special Administrative Region (HKSAR) to enact laws on its own to prohibit acts and activities that endanger national security.

“We must guard against those seeking to provoke conflict, misinform or spread rumors through different channels, and remain alert to acts of “soft resistance” in different forms that can undermine the governance of our country and the HKSAR,” he said.

— CNBC’s Vivian Kam contributed to this story.

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