Hong Kong property prices to fall further, government should reconsider extra stamp duties, CPA Australia says

The government should consider reviewing the extra stamp duties on property transactions, CPA Australia executive says
Survey respondents’ pessimistic outlook for property market contrasts with their views on city’s economy, firms’ revenue outlook and job market

Hong Kong property

Eric NgandSalina Li

Published: 7:30am, 14 Dec 2022

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Hong Kong property prices are tipped to fall further in 2023 even as the economy improves, according to a survey conducted by CPA Australia, which also said it is time for the Hong Kong government to reconsider its property sector cooling policies.

The survey, conducted in November, polled 210 respondent accountants and finance professionals, of which about 59 per cent said they expected retail shop prices to fall next year. About 56 per cent believed office prices would decline too, 54 per cent anticipated home prices would fall, while 52 per cent made the same forecast for industrial properties.

“The government could consider reviewing the extra stamp duties on property transactions, and setting out plans to boost tourism,” Eden Wong, CPA Australia’s divisional president of Greater China, said in a statement on Tuesday.

The Hong Kong government has since 2010 levied a slew of stamp duties on residential property transactions. The Hong Kong Monetary Authority, the city’s de facto central bank, has also imposed rules on home loans to dampen investment demand and runaway prices, and contain financial risks.

11:31

As mainland China reopens, what is the market outlook for the mainland and Hong Kong?

This is because the prices of lived-in homes in Hong Kong increased by 160 per cent from 2010 to 2021, according to a government index tracking the segment. As of December 4, however, they have plunged 17.6 per cent since a peak in August 2021, based on the Centa-City Leading Index, a gauge of lived-in home prices compiled by Centaline Property Agency. Moreover, the agency expects this gauge to decline further by late January, extending the decline to nearly 25 per cent.

“We think homebuyers will take a wait-and-see approach, unless either sellers soften their tone on pricing or the US Federal Reserve softens its tone on interest rate hikes,” Jieqi Liu, an analyst at brokerage firm UOB KayHian, said in a research report released on Tuesday.

Analysts said the good news is that China is easing its tough zero-Covid policy and Hong Kong is further relaxing its Covid-19 restrictions. The Hong Kong government on Tuesday announced international arrivals from Wednesday who test negative will no longer need an amber health code and can enter restaurants and other premises previously off limits to them. New rules will also do away with the scanning of QR codes to enter citywide premises.

Rapid US rate hikes and a weakened economic outlook would, however, continue to take a toll on the housing market, according to Joseph Tsang, chairman of JLL in Hong Kong. The performance of the city’s residential market will rely on whether a full-scale reopening with mainland China and overseas will stimulate the economy, he said.

Tsang also called for the government to relax its property sector cooling measures, adding that this would slow down the pace of home price declines.

The survey respondents’ pessimistic outlook for the property market contrasted with their views on the city’s economy, their firms’ revenue outlook and the job market.

Some 47 per cent said they expected Hong Kong’s gross domestic product to grow next year, while 13 per cent expected it to stay steady.

The “cautiously optimistic” outlook was probably driven by the easing of Hong Kong’s Covid-19 pandemic restrictions, which are helping to reconnect Hong Kong with the world, said CPA Australia’s Wong. This would support retail property prices, but residential prices will be more affected by US interest rate movements, as well as land supply policies going forward.

07:32

BIS chief Carstens: High interest rates to stay even if a US recession might be 'avoided' in 2023

The government last month downgraded its full-year economic forecast to a drop of 3.2 per cent, compared to an earlier projection of between 0.5 per cent growth and 0.5 per cent contraction, citing a deteriorating external environment and the pandemic.

Business sentiment, however, appears to be improving, with 43 per cent of respondents forecasting that their companies’ revenue would grow in 2023. Just more than 20 per cent forecast a decline.