The move, effective immediately, is aimed at turning around a significantly depressed property market. 

Some voices had speculated an easing was in the offing after a first relaxation by the government last October, but they were not taken all that seriously. 

Although property in Hong Kong has fallen by more than a fifth since 2021, the prolonged downturn is not all that palpable given that purchase prices – and rents – in real terms remain relatively high when compared with many other major markets around the world. 

Quick Removal

Still, the Hong Kong government announced on Wednesday that things were bad enough that it would cancel all the restrictions related to purchases of residential property and that it would do so immediately.

In short, that means getting ready to forget about a bunch of stamp duties. That is because the step means no more Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD), or New Residential Stamp Duty (NRSD).

Deep Concern

Although the world should be relieved by the instant deletion of the three acronyms ending in SD, the step seems to have been taken with a certain amount of urgency. The wording in the government’s announcement, which was part of the 2024-25 city budget released on Wednesday, showed that officials seemed to have become quite concerned about the state of the market, given that they had «been keeping a close watch» on developments.

«After prudent consideration of the overall current situation, we decide to cancel all demand-side management measures for residential properties with immediate effect,» the speech indicated.

Fed at Fault

But that is only one part of the equation as everything is not only the city's doing. The brunt of the recent crisis is likely due to the sharp increase in interest rates by the Federal Reserve starting in 2022, something that exacerbated the situation in Hong Kong given its currency is pegged to the US dollar.

The government also touched on that, pointing at further adjustments the HKMA would be making.

Banks Issued Guidelines

The HKMA for its part said in a press release, also issued Wednesday, that it had issued guidelines for banks to adjust their so-called «countercyclical macroprudential measures» for mortgage loans together with other supervisory requirements.

The gist here is that the maximum loan-to-value ratio for most kinds of properties will be raised, cutting the cash needed for down payments.

Deep Crisis

The HKMA also discussed the current property crisis in some depth. According to them, residential property prices fell 7 percent in 2023 and they are already down 1.6 percent in the first month of the year, which seems to point towards an accelerating decline.

The cumulative decline in property prices since their peak in 2021 is more than 20 percent, or one-fifth. The HKMA indicated that the situation was roughly similar in the commercial real estate market.

Nothing Doing

The key question now is whether this will provide any support to the market. Given the price declines didn’t set in until the Fed started hiking rates, it is unlikely things will recover all that significantly until they start cutting, a step expected later this year.

That means the property market is probably going to go through what the equity markets are feeling on off days – the uncertain mantra of higher for longer that Fed officials are trying to get across to the public, and investors.