Amid the global economic slowdown, Hong Kong’s recovery has been slower than expected. In view of this, the HKSAR Government has announced a new campaign to revive and revitalize the city’s night economy. However, this will only be a temporary band-aid. A permanent cure lies in reviving and revitalizing the economy as a whole.  

The property and stock markets serve as a barometer of economic performance in Hong Kong. With property transactions remaining stagnant, especially in the secondary market, developers are cutting prices to boost sales. If home prices continue to fall, buyers will lose confidence to enter the market, resulting in a vicious cycle or, worse, a plunge when prices drop to a certain level. By then, it will be too late for the Government to take action. 

As such, making adjustments to the “harsh measures” for the property market is a matter of urgency. The Government must give serious consideration to relaxing existing measures such as suspension of the Buyer’s Stamp Duty (BSD) and Special Stamp Duty (SSD) to stimulate property transactions.

In fact, the SSD has hindered buyers from purchasing a second property to meet their practical needs, such as improving the living environment of their parents or children. Meanwhile, the BSD has undermined people’s desire to invest in real estate and pursue long-term development in Hong Kong, which seems contradictory to the objective of attracting talent to the city. In this regard, I suggested that the Government change the approach to BSD payable by eligible incoming talent on any residential property acquired in Hong Kong from “levy first, refund later” to “exemption first, levy later.”

On the stock market, the Central Government supports Hong Kong in consolidating its status as an international financial centre by enhancing its professional services such as finance, with a view to leveraging its advantages for the development of the Belt & Road. Despite this, to generate more revenue, the Government raised the rate of stamp duty payable on the sale and purchase of Hong Kong stock to 0.13% in 2021.

Given the lacklustre stock performance in Hong Kong, the existing measure is no longer relevant. Instead, a tax reduction or abolishment of the stamp duty on stock transfer will encourage stock trading by promoting market confidence, creating a stabilizing effect and offering investors a rosy outlook. 

The Government has anticipated that incoming tourism and private consumption will continue to be the key drivers of economic growth for the rest of the year. Nevertheless, without the stimulus of more consumption vouchers, private spending remains sluggish. The consumption pattern of Mainland visitors has also changed. To regain its economic vitality, Hong Kong must revitalize its stock and property markets.

Jeffrey Lam
jeffrey@jeffreylam.hk