- Hong Kong removes all tough measures related to residential properties to boost the real estate market.
- Housing prices have fallen by 20% since 2021, affected by political and economic turmoil.
- It is expected that more than one billion Hong Kong dollars will support the tourism sector, which has been affected by the decline in the Chinese economy.
Hong Kong took a decisive step on Wednesday. It aims to revitalize its weak real estate sector. The city announced the cancellation of many restrictive measures. These measures were initially imposed to calm the overheated real estate market. Specifically, the repealed measures include additional stamp duty for foreign buyers. They also got rid of the requirement to purchase second properties and the penalties for selling apartments within two years from the date of acquisition. Most importantly, this bold strategy is part of a broader effort. It seeks to stimulate the city's economy. As a result, the economy is expected to see modest growth of 2.5% to 3.5% this year.
At the same time, the backdrop is falling housing prices. They are down 20% from their peak in 2021. This decline is due to a combination of economic and political challenges. Therefore, this policy shift is a crucial step. It aims to restore confidence in the real estate market. Moreover, the market decline was exacerbated by strict national security measures. The slowdown in China's economy has also played a role. This has greatly affected the influx of Chinese home buyers. Initially, market response was mixed. The real estate sub-index showed initial gains. However, it then stabilized slightly lower. Conversely, there was a rise in local real estate agency stocks. Examples include Midland Realty and Legend Upstar.
Financial and health reforms in Hong Kong
Besides housing market reforms, the Hong Kong government has taken other important measures, including increasing taxes on tobacco with the aim of reducing smoking. Fiscal health remains a priority, with the administration committed to a “fiscal consolidation strategy” to gradually narrow the fiscal deficit. Despite persistent deficits over four of the past five years, the government should restore fiscal balance, projecting a lower deficit in the next fiscal year and aiming to keep government debt at a manageable level relative to GDP.
A HK$1 billion boost to the tourism sector
Hong Kong is also focusing on revitalizing the tourism industry to counter the economic downturn and the negative effects of geopolitical tensions and capital flight. With more than HK$1 billion allocated to tourism support measures, the government aims to mitigate the impact of the decline in visitors from mainland China, as a result of China's faltering economy. This initiative reflects Hong Kong's multi-faceted approach to confronting its economic challenges, emphasizing the importance of supporting key sectors to achieve overall growth and stability.
