Hong Kong government announces comprehensive withdrawal of property cooling measures (Updated: 11.19am)

Paul Chan

28th February 2024 – (Hong Kong) Financial Secretary Paul Chan announced today the withdrawal of all residential property demand-side management measures  in the new budget. Effective immediately, homebuyers will no longer be required to pay the additional stamp duties, including the Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD), and the New Residential Stamp Duty (NRSD). The government believes that these measures are no longer necessary given the current economic and market conditions.

In an effort to curb the overheating property market, various measures were introduced over the past decade. It began in November 2010 with the implementation of the SSD, which imposed a 5% to 15% tax on property resold within two years. At that time, the Hong Kong property market was experiencing steady growth, with the Centa-City Leading Index (CCL) standing at 89.41 points.

Two years later, in October 2012, the government introduced an enhanced version of the SSD, extending the resale restriction period to three years and increasing the tax rate to 10% to 20% of the property price. The government also introduced the BSD, requiring non-local buyers and corporate buyers to pay a 15% tax on the property price. Over this short period, property prices rose by nearly 30%, based on the CCL of 116.07 points.

Despite these measures, property prices continued to climb. From 2010 to 2013, within three years, prices increased by 56%, with the CCL rising from 76.17 points to 118.96 points. In response, the government introduced further measures in November 2016 and April 2017, imposing a uniform 15% tax on buyers of second or subsequent properties and a 15% ad valorem stamp duty on the purchase of multiple units under one contract by first-time buyers.

The cumulative effect of these measures was an increase in property prices by approximately 114% from the initial period, as reflected in the CCL reaching a historic high of 191.34 points in August 2021. However, these cooling measures failed to achieve their intended goal of curbing the property market’s upward trend.

Following the peak in August 2021, the housing market began to decline, compounded by the correction in the US interest rate cycle in March 2022, which exerted further pressure on the Hong Kong property market. Some argued that the cooling measures had become outdated and called for a review of the government’s housing policies.

In October 2022, as part of the government’s efforts to attract talent, Chief Executive John Lee announced in the Policy Address that qualified non-local professionals, upon acquiring permanent residency, would be eligible to apply for a refund of the additional stamp duties paid for their residential properties. This “pay-first, refund-later” policy allows eligible individuals who have resided in Hong Kong for seven years and become permanent residents to apply for a refund of the BSD and NRSD on their first residential property. However, they will still be required to pay the ad valorem stamp duty based on the “second standard rate.” Despite this announcement, the housing market did not experience a rebound, and by the end of December 2022, the CCL had already dropped by nearly 17.8% from its peak.