By Jiahui Huang

Hong Kong has removed several housing-market curbs that have been in place for over a decade as it bids to revitalize the sector, part of efforts to cement a broader recovery that has struggled to gain traction after a postpandemic rebound.

The Asian financial hub scrapped transaction taxes on residential property effective immediately, a move that surprised market watchers who had been expecting some form of easing but quite to that extent.

Hong Kong's government has been monitoring the housing market closely, as prices slump amid anemic demand.

"We decided to cancel all demand-side management measures for residential properties," Financial Secretary Paul Chan said in the annual budget address Wednesday, deeming them as "no longer necessary amidst the current economic and market conditions."

The measures include a special stamp duty, buyer's stamp duty and new residential stamp duty--taxes levied on buyers and sellers of residential properties. This was accompanied by moves to make it easier for prospective homebuyers to get mortgages.

Sentiment in the residential property market had "become very cautious" since the middle of 2023, Chan said, with headwinds coming from higher global interest rates and an uncertain external environment. Apartment prices dropped 7% in 2023, while the number of residential property transactions fell 5%, he added.

"Taking into account the external and local economic situation, we consider that there is now room to make further adjustments to the relevant measures," the financial secretary said, referring to countercyclical macroprudential measures for property mortgage loans that Hong Kong's central bank had adjusted last year.

The Hong Kong Monetary Authority's property-lending adjustments mean that homebuyers now only need to have a 30% down payment for properties valued below HK$30 million. The loan-to-value ratio for more expensive properties was also adjusted.

Hong Kong had been widely expected to relax some of the property-cooling measures initially designed to keep prices in check, but few had anticipated the scope of the easing.

"It beats market expectations," said Bruce Pang, head of research and chief greater China economist at JLL.

The "more aggressive" measures could be a sign that the government's previous lowering of stamp duties, back in October, didn't have the desired effect, Pang told Dow Jones Newswires. He expects the more drastic policy shift to help ease pressure on home prices and sales in Hong Kong, and buoy buyers' confidence.

Property stocks rose in Hong Kong after the news, with the Hang Seng Properties Index gaining 3.1% shortly after the announcement. Shares in Henderson Land Development, Hong Kong's biggest developer, rose 3.6%, while New World Development gained 3.1% and Sun Hung Kai Properties edged up 0.4%.

But breathing life back into the market won't be easy, analysts say.

External headwinds continue to loom large. An often cited factor is the slowdown in China, which has been battling a property market downturn that has dragged down its economy. The timing of an interest-rate cut by the Federal Reserve, which would likely kick off a cycle of global central bank easing, is another.

For ANZ Research analyst Raymond Yeung, the Fed decision remains the decisive factor for the Hong Kong property sector, which had previously benefited from a decade of low interest rates.

Any boost to property transactions from Wednesday's measures will likely be mild, said Sonija Li, Maybank's head of retail research, estimating a mid-single digit increase. The uncertain economic outlook, weak homebuyer confidence and interest-rates trends will likely cap the impact of the policy easing, but property prices should improve, she told Dow Jones.

Though more action may be needed to really shore up confidence, Wednesday's scrapping of taxes is a big step.

It brings to a close the property-tightening stance that has shaped the market since 2010, said Raymond Yeung, an analyst ANZ Research.

"It marks the end of an era," he said.

--Fabiana Negrin Ochoa contributed to this report

Write to Jiahui Huang at

(END) Dow Jones Newswires

02-28-24 0312ET