Hong Kong’s property market needs time to adjust to new cooling measures introduced in policy address, John Lee says

Hong Kong’s property market needs time to adjust to a series of cooling measures introduced by the government less than a month ago, the city’s leader has said amid slow land sales over the past few weeks.

Chief Executive John Lee Ka-chiu on Tuesday also said property market woes were not unique to Hong Kong, but also faced by other economies due to high interest rates which might persist for some time.

“Obviously, the market and buyers will take time to observe the situation and make the decision, because buying property is, after all, a major decision for a normal family,” Lee told reporters before his weekly meeting with key decision-making body the Executive Council.

Lee cited media reports stating that more inquiries had been made to property agents by interested buyers, particularly those who came to Hong Kong under various schemes aimed at attracting talent. The city welcomed 70,000 people under such programmes in the first 10 months of the year.

“It is natural that people will take time to make [the decision to buy a house],” Lee said, stressing that the property curbs were lifted less than a month ago.

The MTR Corporation last week failed to entice local property developers to jointly build a large-scale mixed-use property in Tung Chung near the city’s airport, a week after the government failed to sell another site in the area after bidding fell short of its reserve price.

The setback signalled uncertainty in the outlook for Hong Kong’s housing market.

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Commenting on the overall land sales situation in Tung Chung, city leader Lee said the bidding process might be affected by a previously high supply of housing in certain locations.

“When considering bidding, property developers also take into account the overall market conditions in addition to the location,” he said, emphasising that it was expected that people would closely monitor market trends at this stage before making a purchase.

Lee announced in his second policy address last month that the buyers’ stamp duty for non-permanent residents and the new residential stamp duty for local homeowners who purchased more property would be halved, bringing both down to 7.5 per cent from the previous 15 per cent.

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Eligible overseas talent are also not required to pay stamp duty on property purchases unless they fail to become permanent residents.

The special stamp duty, equivalent to 10 per cent of the price of a home, was also waived immediately for buyers reselling their property after two years, reduced from the original three years.

The measures were introduced in the wake of a continued decline in home prices.

In the seven days following Lee’s announcement on October 25, 182 new homes were sold, according to property agents.

The primary market logged 362 transactions in October, a 32 per cent jump compared with 274 logged in September, which was this year’s lowest total. The figure for October was still far below the 2,100 transactions recorded in March, according to Midland Realty.

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Lee on Tuesday said people were being careful when investing as the interest rate was at almost 5 per cent for deposits, which was “almost a risk-free return on money deposited”.

Noting there were various factors affecting people’s decision to buy property, the city leader said the government had acquired enough land for housing to put on the market at the right time.

“The government’s policy is to make our policy considerations be transparent as much as possible, and try to be helpful to decision makers who will have to consider whether they should buy or not buy any property according to their own situation,” he said.