Hong Kong Developers' Stocks Rise After Scrapping of Property Cooling Measures

Hong Kong Developers See Surge in Stocks After New Property Measures

Following the recent decision by Financial Secretary Paul Chan to eliminate property cooling measures in Hong Kong, the stocks of Hong Kong developers experienced a significant surge.

Immediate Effect on Property Market

In his budget speech, Chan revealed that all buy-side tightening measures for residential properties will be withdrawn, and stamp duties payable on the transfer of REIT units will be waived with immediate effect. This move is aimed at bolstering a sector that has been grappling with high borrowing costs and weak economic sentiment.

The announcement resulted in the Hang Seng Property index jumping 2.4%, although it has slightly receded from session highs. Conversely, the broader Hang Seng index fell 1.47%. New World Development shares initially soared by over 8% and are currently trading at a 4% increase, while Hysan Development experienced a 0.3% surge. Sun Hung Kai Properties and CK Asset saw rises of 1.35% and 0.55% respectively, with Henderson Land Development trading 3.83% higher.

Impact on Housing Prices

Hong Kong's housing prices, which were once the most expensive in the world, have plummeted by almost 20% since their peak in 2021 due to rising interest rates and subdued market sentiment. Data from the city's Land Registry indicates a 2.7% decline in the sale and purchase agreements for all building units in 2023 compared to the previous year, with sales also dropping by nearly 40% from 2021. Moreover, the government's home price index recorded a ninth consecutive monthly decline in January, falling by 1.57%.

Industry Expert's Insights

"With these reductions in stamp duty, I think we'll see certainly a fairly quick pickup and transaction volumes," stated Peter Churchouse, managing director of Portwood Capital, a prominent real estate investment company. He added, "Then towards the back end of the year, we might start to see a little bit of a pickup in property prices."

Churchouse emphasized the positive impact of the stamp duty reduction on transaction volumes and predicted a potential rise in property prices by the year's end. Notably, the city had previously imposed a 7.5% stamp duty on non-permanent residents purchasing property, along with additional levies for properties bought by permanent residents. These rates were previously slashed from 15% in October.

Expected Market Reactions

Churchouse expressed optimism about the broader Hong Kong stock market, suggesting that these developments could lead to a positive turn for the market, which has been closely correlated with the residential property market. Hong Kong's stock markets have experienced a decline of approximately 40% from their previous highs.

Chan also indicated the potential for further relaxation of property lending policies, with the Hong Kong Monetary Authority expected to make announcements regarding this later in the day. Furthermore, Chan expressed his anticipation of the economy's growth within a range of 2.5% to 3.5% for the year.

Government Support for Tourism Industry

Additionally, the Hong Kong government is rolling out over 1 billion Hong Kong dollars (approximately $127 million) to provide support to the tourism industry in a bid to bolster its recovery.