Rollback of property cooling measures to spur sales, but no silver bullet to recovery

Analysts estimate up to a 15% sales increase, although prices may still fall in 2024.

Hong Kong’s withdrawal of all property cooling measures in the housing market is expected to lead to a significant sales increase, but won’t be enough to reverse the downward trend, analysts said.

In the 2024 Hong Kong budget speech, Financial Secretary Paul Chan unveiled a full roll-back of property cooling measures. These include the special stamp duty (SSD) of 10% to 20% if owners resell their units within 2 years; the Buyer’s Stamp Duty (BSD) or an additional 7.5% for non-Hong Kong and company buyers; and the New Residential Stamp Duty (NRSD) of HK$100 to 4.25% of the property value.

The move may lead to a 10% to 15% sales increase in 2024, says JLL Hong Kong chairman Joseph Tsang. 

Still, Tsang expects housing prices will still fall by 10% as the market continues to grapple with high interest rates and a weak economy.

“Currently, there is a potential new housing supply of 109,000 units, which poses pressure on developers. It is expected that developers will accelerate their pace of launching new projects,” Tsang said.

Colliers’ head of research Kathy Lee noted that the positive impact from the policy will only become more evident in H2 2024, with housing prices rising by 5% to 10% in 2025.

The withdrawal of cooling measures may also lift the second-hand residential market, with transaction volumes likely to rebound to 63,000 units for 2024, around the same level as in 2017 to 2021, Lee said.

CBRE’s head of research Marcos Chan also expects recovery of transaction volumes to be gradual.

“We believe this is seen as a positive move and will likely create positive momentum for the market, however, any pickup in transaction volume will be gradual as high borrowing rates remain a hurdle for many commercial investment activities - rental recovery and vacancy improvements remain the key for a more sustainable recovery in investment demand,” Chan said.

Meanwhile, after declining for 9 consecutive months, the downward trend in residential prices will likely pause and stabilize in the short term, said CBRE Hong Kong senior director for valuation & advisory services Eddie Kwok.

Kwok, like Colliers’ Lee, expects that the removal of special stamp duty (SSD) to spur second hand-units to be put up for sale.

“Going forward, we expect there might be increasing homeowners surrendering their units at price cuts, which may put pressure on residential prices,” Kwok said.