28th February 2024 – (Hong Kong) Hong Kong’s property market stands at a crossroads, caught between a past of restrictive measures and an uncertain future. The government’s recent announcement to retract all cooling measures for the property sector, once heralded as the panacea to the city’s housing woes, has been met with scepticism and the pressing question: Is it too little, too late?

Financial Secretary Paul Chan’s declaration bears the weight of a decade-long struggle to stabilise a market that has been as much a symbol of prosperity as it has been a platform for public discontent. The withdrawal of the Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD), and New Residential Stamp Duty (NRSD) reflects a seismic shift in policy, a reaction to a market that has seen a precipitous drop in prices by nearly twenty percent over the last four years.

The cooling measures in question were a collection of taxes and regulations introduced progressively since 2010, intended to curb speculative buying and soaring property prices. These included higher stamp duties for non-permanent residents and buyers of second homes, as well as levies on homes resold within a short period. While these policies were effective in blunting the sharp spikes in property prices, they also inadvertently erected barriers for genuine buyers, stifling demand and contributing to a market downturn exacerbated by the socio-political unrest and the global pandemic.

As the Financial Secretary asserts, the decision to abolish these measures is a response to “the overall current situation,” a nod to the economic pressures and the need to facilitate ownership in a city where a home is both a dream and a commodity. The Hong Kong Monetary Authority (HKMA) has echoed this sentiment by easing lending policies, increasing the mortgage financing cap for homes under HK$30 million, and adjusting loan-to-value ratios for luxury and rental properties. These moves are aimed at breathing life into a stagnant market, but there is an undercurrent of concern that they may have come too late.

The property sector has long been the bedrock of Hong Kong’s economy, but in recent years it has shown signs of strain. The once-booming market is now navigating through the doldrums, with sales dwindling and prices sliding downwards. Analysts have characterized the government’s delay in retracting the cooling measures as a case of “not seeing the coffin and not shedding tears,” a local expression that captures the belated nature of the acknowledgment of the market’s decline.

In February 2020, calls for a full repeal of the cooling measures were already resonating among scholars and experts, who criticised the ‘spicy measures’ for their counterproductive effects. Yet, the government turned a deaf ear, leading to a four-year lag before the implementation of today’s full-scale withdrawal. The delay has been costly; property prices have not just dipped but plummeted, leaving the government’s latest measures potentially ineffective in reinvigorating the market.

The crux of the matter, as industry observers note, is not just the removal of the cooling measures, but the broader economic context in which the property market operates. There’s a palpable sense that the market’s fortunes are intertwined with global economic trends, particularly the United States’ interest rate policies. The sentiment among potential buyers is one of caution, with many adopting a wait-and-see approach, biding their time for a signal that could come in the form of a rate cut by the U.S. Federal Reserve.

This cautious optimism is tempered by the reality of the market’s dynamics. The scrapping of the curbs has certainly buoyed property stocks, but whether this will translate into a sustained increase in transactions and prices remains to be seen. The government’s measures, while bold, are not a panacea. They are a starting point, a necessary recalibration of policies that may have outlived their usefulness.