Opinion | Mainlanders question Hong Kong property market

The Hong Kong government has been managing the ups and downs of the property market for more than a decade, imposing tough measures on non-permanent resident buyers in 2010 to curb speculation and prevent prices from rising due to a tight supply of private housing.

They worked by scaring away buyers who lived on the continent or abroad for years. But then the market softened.

In February, Financial Secretary Paul Chan Mo-po wisely decided the controls had done their job, a move that unleashed a wave of pent-up demand from mainland buyers, according to the latest data from Centaline Property Agency.

Mainland Chinese residents spent HK$70.5 billion in the first half of the year, up 42% year-on-year. They accounted for one in five housing transactions during the period.

The authorities eliminated the buyer’s stamp tax, which was aimed at non-permanent residents, and the new housing stamp tax for second-time buyers. Homeowners were also given an exemption from paying the special stamp tax if they sold the property within two years. For those affected, real estate immediately became 30 percent cheaper.

Until February, property prices had fallen for nine months in a row, reaching their lowest level in seven years, driven by a slow economic recovery, high interest rates and a large supply of properties on the market.

The exodus caused by concerns about pandemic control and safety regulations has not helped. The government has launched a program to attract talent from abroad.

The measures appear to be working, so far. Mainlanders snapped up a third of the new homes sold in the city in the first half of the year. While they don’t drive up prices, the purchases at least put a lid on the market while developers work through their inventory backlogs.

The question is whether this market support will last. Centaline predicts that the share of buyers from the continent will fall to one in ten in the second half of the year as excitement about the easing measures fades.

Hong Kong real estate is among the most expensive in the world. However, allowing the sell-off to continue would not help economic growth and stability. With interest rates expected to fall in September, hopefully more Hong Kongers will have the incentive and opportunity to join the queue for a new home.