Amid Hong Kong’s housing problem, Chief Executive John Lee Ka-chiu delivered his second Policy Address on Wednesday. To address repeated calls for the relaxation and withdrawal of property cooling measures, the government partially relaxed measures.
As interest rates have risen significantly over the past year, the local property market has seen a drop in transactions and an adjustment in home prices. The government’s decision to ease measures was also because Hong Kong’s housing supply will continue to increase in the future. The measures are as follows:
First, the Government shortened the applicable period for the Special Stamp Duty (SSD)—a measure to curb short-term speculation—from three years to two years. This means that homeowners who sell their homes after holding them for two years are no longer required to pay the SSD at 10% of the property price.
Further, the Government has halved the rates of Buyer’s Stamp Duty (BSD) and New Residential Stamp Duty (NRSD), both of which will be reduced from 15 per cent to 7.5 per cent. This will help alleviate the financial burden of Hong Kong permanent residents who already own residential properties in purchasing new ones, as well as the cost of purchasing residential properties for non-Hong Kong permanent residents.
At the same time, the Policy Address has enhanced the arrangement for refunding stamp duty on home purchase in Hong Kong to eligible foreign talents last year, from "levy first and then refund" to "waive first and then levy", so as to reduce the upfront expenses incurred by foreign professionals in settling in Hong Kong.
Under the new measure, buyer's stamp duty and stamp duty on new residential properties will be waived at the time of purchase, but they will still be required to pay the second standard rate of ad valorem stamp duty, which will be payable only if they eventually fail to become permanent residents of Hong Kong, and the temporary waiver arrangement will only apply to the first property.
It’s worth noting that Hong Kong is facing population loss. With a dwindling birth rate, the average number of children born to couples dropping from 1.3 five years ago to 0.9, which is a record low, and the Government has therefore introduced a series of measures to encourage childbirth.
Among the measures include the “Families with Newborns Allocation Priority Scheme” to encourage families with newborns to purchase subsidised sale flats. Starting from next year, an additional 10% of flats will be reserved for priority flat selection. Under the aforementioned scheme, the waiting time for public rental housing (PRH) for families with newborns will be shortened by one year to encourage childbirth.
Owners of second-hand subsidised housing will also benefit. The Policy Address proposes to extend the mortgage loan guarantee period for subsidised sale flats in the second-hand market by extending the maximum mortgage loan guarantee period from 30 years to 50 years. This would help buyers to obtain mortgage loans with a longer tenure, facilitating the turnover of flats.
However, the introduction of the new rules caused misunderstandings. Some believed that these measures meant that the maximum mortgage period for flats could last for up to 50 years. In reality, the new arrangements mean that the mortgage loan guarantee period is not equivalent to the available mortgage loan term. This means that if the owner breaks the mortgage loan during the period, the Housing Authority (HA) will bear the responsibility for the loan.
The Policy Address has indeed relaxed property cooling measures, albeit less than expected. Will this be enough to revive the Hong Kong property market? Only time will tell.
