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Hong Kong’s home prices are expected to fall 30 per cent by the end of next year, according to a forecast by Goldman Sachs. Photo: Sam Tsang

Easing of cooling measures is not a cure-all for Hong Kong’s struggling property market, say analysts

  • Any relaxation of the government’s cooling measures will only slow down the decline in homes prices but not reverse the trend, says DBS Bank analyst Jeff Yau
  • Chief Executive John Lee is expected to unveil many measures in his inaugural Policy Address to revive Hong Kong’s struggling economy
The potential easing of cooling measures anticipated in Chief Executive John Lee Ka-chiu’s maiden Policy Address will stimulate housing demand but not necessarily lead to a quick rebound in prices because of the prevailing headwinds, according to analysts.

Lee is expected to announce several groundbreaking measures in his address on Wednesday, aimed at reviving the city’s battered economy. Property developers and agents have been lobbying the government to scrap legacy stamp duties.

Analysts have not ruled out the possibility of the government relaxing some of its measures to cool the property market in the event of a sharp correction. However, its impact on steadying prices will be felt gradually, they added.

“After the relaxation, it does not mean the housing market will rebound tomorrow,” said Jeff Yau, group research executive director at DBS Bank (Hong Kong). “I believe the extent of the decline will slow down.”

Chief Executive John Lee Ka-chiu will deliver his maiden Policy Address on Wednesday. Photo: Sam Tsang

If the cooling measures are dropped, the price decline may slow down but the trend will not be immediately reversed, he added.

The government introduced a series of extra stamp duties and taxes on residential property transactions since 2010 to curb non-local and speculative housing demand. The first was the Special Stamp Duty (SSD) in November 2010 to curb speculation, followed by the Buyer’s Stamp Duty (BSD) in October 2012 to suppress demand from non-local buyers. A year later the Double Stamp Duty (DSD) was introduced, which is applicable to multiple property owners. Pressure has now mounted on these taxes as the city faces economic headwinds.

“BSD, SSD and DSD, do they need to exist at this moment?” Yau asked.

How Hong Kong tries to cool the home property market, and whether it should

He also said he expected Hong Kong home prices to fall 5 per cent next year, joining analysts from Goldman Sachs, Morgan Stanley, HSBC, JLL and Colliers who have made similar forecasts.

Goldman’s predictions have been the most dire. It expects home prices to plummet by 30 per cent by the end of 2023, as sharply increasing interest rates continue to pressure affordability and repel investors from the market.

“I don’t think [prices] will immediately rebound sharply if [cooling measures] are withdrawn,” said Chong Tai-leung, associate professor at the Chinese University of Hong Kong.

Hong Kong home prices fell in August by most since February 2019

Chong said the extra stamp duty made homeowners hesitant when deciding to sell and failed to tame the growth in home prices.

“I don’t think that these cooling measures have been effective,” said Chong. “It hinders the normal operation of the property market … so I have always recommended scrapping them.”

Chong said transaction volume has shrunk dramatically after the imposition of cooling measures, dampening the livelihood of many property agents and market players.

Chong expects transactions to improve if cooling measures are scrapped. “The entire industry chain, be it transactions or renovations, will pick up. The whole economy will recover.”

He said this requires a Chief Executive bold enough to scrap the cooling measures.


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“The cooling measures were demand management measures introduced 10 years ago,” said Victor Lui Ting, deputy managing director at Sun Hung Kai Properties (SHKP). “The amount of stamp duty levied by the government in the past few years is not large. I believe the government will make adjustments balancing various parties’ views.”

Partial relaxation of the cooling measures would show that the government is adapting to the needs of the times, he added.

SHKP, Hong Kong’s biggest developer by value, priced the first batch of 50 flats at Park Yoho Bologna in Yuen Long at HK$13,088 per square foot after discounts on Tuesday.

The price is 26.9 per cent lower than the HK$17,898 per square foot for the second phase of Grand Mayfair launched in May, according to data from Centaline.