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Opinion | Two creative ways for Hong Kong to keep its property market on an even keel
- The government must strike a balance between property cooling measures and the need to maintain a stable housing market
- It could consider reintroducing the Capital Investment Entrant Scheme of 2003, albeit with some restrictions, and offering further stamp duty relief to young couples
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On December 1, the Centa-City Leading Index, which is the de facto benchmark for secondary private home prices in Hong Kong, reached a six-and-a-half-year low of 151.06. Local housing prices have fallen considerably since the index rose to a record high of 185.62 points in September 2021.
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Before Chief Executive John Lee Ka-chiu delivered his policy address in October this year, there were calls by developers for property cooling measures to be scrapped.
These so-called spicy measures included various stamp duties imposed on sellers and buyers, such as a special stamp duty payable by homeowners who were selling within three years of their purchase, and a buyer’s stamp duty levied on non-permanent residents.
However, the question remains: were the cooling measures wholly to blame for the bleak market for secondary homes in the past couple of years? While they may have been a contributing factor, I would argue that mass emigration, the gloomy post-Covid-19 outlook for the world economy, the Russia-Ukraine war and other geopolitical conflicts, not to mention global interest rate hikes, all weighed on secondary home prices in this city.
The cooling measures could not have been the only factor contributing to the sliding prices. If they were, we would have seen a change in market sentiment after the chief executive announced an easing of some of the measures during his policy address in October.
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On the other hand, a housing market meltdown could trigger a chain of economic catastrophes. For example, when home equity values fall below mortgage loan amounts, banks may be forced to recall loans, setting off a domino effect of defaults and foreclosures.
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