Several long-standing measures designed to curb property speculation and reduce external demand have been eased in a bid to boost Hong Kong’s ailing housing market, Chief Executive John Lee has announced.

Housing in Hong Kong. File photo: Kyle Lam/HKFP.
Housing in Hong Kong. File photo: Kyle Lam/HKFP.

Lee announced the changes to various stamp duties during his second Policy Address, which was delivered to lawmakers on Wednesday.

From Wednesday, the Special Stamp Duty (SSD) period was shortened from three to two years, meaning that if an owner got rid of their property after two years of acquiring it, they would not need to pay the 10 per cent SSD.

Also announced with immediate effect on Wednesday was “a stamp duty suspension arrangement for incoming talents’ acquisition of residential properties,” Lee said. According to the new policy, eligible non-permanent residents will have stamp duty suspended at the time of their first property purchase, although they will have to pay the relevant amount if they do not obtain permanent residency.

Previously, they were required to pay stamp duty but would receive a refund upon acquiring right of abode.

“The policy intention is to retain them as future Hong Kong permanent residents,” a government source said.

The Buyer’s Stamp Duty and the New Residential Stamp Duty have both been reduced by half, from 15 per cent to 7.5 per cent. The latter applies to second homes.

“This arrangement will help alleviate the financial burden on Hong Kong Permanent Residents who have already owned residential properties in their acquisition of another residential property, as well as reduce the costs of non-HKPRs in their acquisition of residential properties,” Lee said.

Construction at the Coast Line properties. Photo: Kyle Lam/HKFP.
Construction at the Coast Line properties. Photo: Kyle Lam/HKFP.

“Considering all factors that affect the real estate market, we think there’s room for easing the ‘spicy measures’… but the principle is to ensure the healthy development of the real estate market, and balance the risk of property speculation,” a government source said.

Finance minister Paul Chan earlier this month said he would be “pragmatic” in deciding whether to curb stamp duty, as recommended by embattled developers. “We will consider this pragmatically, with reference to market conditions and the environment in which the policy was formulated,” he said.

Housing in Hong Kong. File photo: Kyle Lam/HKFP.
Housing in Hong Kong. File photo: Kyle Lam/HKFP.

He added that corporate taxes would make up for the expected shortfall in government revenue, and the city’s economy would remain stable in the medium to long term.

The Democratic Alliance for the Betterment and Progress of Hong Kong had earlier suggested cutting the duty on residents’ purchases of second properties from 15 per cent to 6 per cent, saying the economic environment in which the government imposed measures to curb demand and rampant speculation was greatly different from the current situation.

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth, and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” Lee said on Wednesday.

Xi Jinping Hong Kong visit
Photo: RTHK, via video screenshot.

Despite falling house prices, Hong Kong was still home to the least affordable housing market in the world according to a Demographia International Housing Affordability report released earlier this year.

China’s leader Xi Jinping urged Hong Kong to “earnestly address people’s concerns and difficulties in daily life” during a speech delivered while in the city to celebrate the anniversary of its Handover to Chinese rule in July 2022.

“Currently, the biggest aspiration of Hong Kong people is to lead a better life, in which they will have more decent housing,” Xi said.

Correction 7.40 pm on 25/10/2023: An earlier version of this article incorrectly stated that Buyer’s Stamp Duty applied to residents, when in fact it is paid by non-permanent residents of Hong Kong. We regret the error.

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James Lee is a reporter at Hong Kong Free Press with an interest in culture and social issues. He graduated with a bachelor’s degree in English and a minor in Journalism from the Chinese University of Hong Kong, where he witnessed the institution’s transformation over the course of the 2019 extradition bill protests and after the passing of the Beijing-imposed security law.

Since joining HKFP in 2023, he has covered local politics, the city’s housing crisis, as well as landmark court cases including the 47 democrats national security trial. He was previously a reporter at The Standard where he interviewed pro-establishment heavyweights and extensively covered the Covid-19 pandemic and Hong Kong’s political overhauls under the national security law.