Hong Kong leader focuses on property and security in policy address

Hong Kong's leader focused on bolstering the property market and stabilising the ailing economy in his annual policy blueprint on Wednesday, while confirming new national security laws would be enacted next year to counter meddling by "external forces".

Chief Executive John Lee said Hong Kong's economy, which contracted 3.5 per cent last year, would "resume growth this year" as inbound tourism and consumption improved, but he noted high interest rates elsewhere in the world posed a challenge.

Hong Kong's economy grew 2.2 per cent in the first half of the year, and is expected to grow between 4 per cent and 5 per cent this year.

Lee, who was sanctioned by the U.S. government for his role in cracking down on freedoms after mass pro-democracy protests in 2019, also emphasized the need to further bolster national security.

"External forces continue to meddle in Hong Kong affairs," he said, without giving specifics or naming any country.

Despite Hong Kong's attempts to restore the city's international reputation and lure more capital, further security legislation including anti-espionage laws, known as Article 23, would be enacted by the end of 2024, Lee said.

"We should pay particular attention to those anti-China and destabilising activities camouflaged in the name of human rights, freedom, democracy and livelihood," he said.

Some Western governments have criticised the ongoing national security clamp down, which has led to the imprisonment of many opposition democrats and closure of liberal media outlets.

PROPERTY AND STOCKS

Turning to the property market, Lee said stamp duty, would be halved to 7.5 per cent from 15 per cent for second home buyers and non-citizen buyers with immediate effect, to help revive a sector that is one of the economy's pillars.

Other adjustments were made to allow some home owners to sell properties after two years without incurring hefty duties.

And Lee said the government would continue to increase the overall supply of land for public and private housing.

The reaction from investors was lukewarm, with shares of Sun Hung Kai Properties (0016.HK) and Henderson Land (0012.HK), two major residential property developers, easing 0.2 per cent and 1 per cent, respectively, in early afternoon trading.

Hong Kong had tried to cool the property market during a surge of nearly 300 per cent in home prices in the decade to 2019.

Since then prices have fallen 13 per cent in the wake of anti-government protests, the COVID pandemic, and a subsequent braindrain of hundreds of thousands of people amid a national security crackdown.

In August, property prices dropped to a seven-month low amid rising interest rates and a bleak economic outlook, and realtors expect them to end 2023 as much as 5 per cent down.

"The relaxation of cooling measures is only a band-aid solution that is unlikely to reverse the downward trend of home prices," said Joseph Tsang, chairman of property consultancy JLL in Hong Kong, citing the global economic downturn and interest rate hikes as lingering factors weighing on the market.

Lee said stamp duties for stock transactions would be reduced to 0.1 per cent from 0.13 per cent to help bolster liquidity in the Hong Kong market, and market data fees would be cut later this year to help brokerages.

He added Hong Kong would seek to strengthen its role as an offshore yuan centre and bolster financial ties to China.

The government also plans to expand its campaign to attract top international talent, having drawn 160,000 applicants last year, of which 60,000 had already arrived, mostly from mainland China.

A new entrant scheme for investors will also be introduced for those who invest at least HK$30 million ($3.8 million) in stocks, funds, bonds, excluding real estate.

($1 = 7.8241 Hong Kong dollars)

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