- The stamp duty that non-permanent residents pay on properties and another levy imposed on additional property purchases by residents will each be halved to 7.5%.
- A special stamp duty of 10% of the property price, previously levied on transactions involving properties held for less than three years, will now apply to transactions involving properties held for less than two years.
- Newly arrived foreign talent will benefit from a complete suspension of all property purchase taxes, but this is contingent on obtaining permanent residency in the Chinese autonomous region.
Hong Kong Chief Executive John Lee delivers his annual keynote address to the Legislative Council on October 25, 2023.
Peter Parks | Afp | Getty Images
Hong Kong will cut stamp duty on property buyers to boost the struggling property sector, while cutting levies on stock trading to boost economic activity in the Asian financial hub.
This is the first time that property cooling measures – in a series of stamp duty measures known as “spicy policies” – will be relaxed from Wednesday. They were first introduced in 2010 to curb red-hot property prices in a low interest rate environment.
“Over the past year, interest rates have risen significantly, various economies have recorded moderate growth and transactions in the local housing market have declined, while property prices have been revised downwards,” Hong Kong Chief Executive John Lee said in his second annual policy Speech on Wednesday.
Hong Kong’s tepid economic recovery after the coronavirus crisis has been accompanied by a decline in stock trading volumes and sluggish residential property transaction volumes in the territory’s once notoriously hot real estate sector.
Hong Kong property prices fell for four months in a row. The official house price index was 339.2 in August, down 7.9% from a year ago and 4.2% from April highs.
Taxes will be relaxed: stamp duty that non-permanent residents pay on property and another levy levied on additional property purchases by residents will each be halved to 7.5%.
Lee also announced that a special stamp duty previously levied on transactions involving properties held for less than three years will now only apply to transactions involving properties held for less than two years. This tax is 10% of the property price.
All stamp duty on property purchases will be suspended for new foreign talent, but this will depend on the new residents being granted permanent residency.
Lee announced plans to cut stamp duty on stock transactions to 0.1% from the current 0.13% in a bid to boost declining trading volumes in Hong Kong.
The reduction is part of several measures, including a review of stock trading ranges and market data prices, to revive activity in one of Asia’s largest and most liquid stock markets.
On Wednesday, Lee unveiled sweeping plans to strengthen the shipping, aviation, technology, arbitration and exhibition sectors to boost the Hong Kong government’s economic attractiveness.
Even as the city returns to modest economic growth after a decline last year, visitor numbers have not yet returned to pre-Covid levels, contributing to poor retail sales.
Strict Covid curbs and the imposition of the National Security Act, which drew sharp international criticism, have damaged the country’s global image and reputation as thousands have left Hong Kong.
In July, Lee vowed to pursue eight pro-democracy activists “to the ends of the earth” and “for life” after arrest warrants were issued against them for alleged national security violations.
Still, he said on Wednesday that Hong Kong would enact additional security laws by the end of 2024, citing Article 23 of its Basic Law, which authorizes and obliges the Hong Kong Special Administrative Region (HKSAR) to enact laws on its own to prohibit actions and activities that endanger it national security.
“We must beware of those who seek to provoke conflict, spread misinformation or spread rumors through various channels, and remain vigilant against acts of “soft resistance” in various forms that undermine the governance of our country and the Hong Kong Special Administrative Region can,” he said.
— CNBC’s Vivian Kam contributed to this story.