Mainland Chinese Eye Hong Kong Property After Duties Ditched

Chinese citizens have rushed to buy homes in Hong Kong after losing interest in the property sector on the mainland, which has been rocked by a debt crisis and an economic slowdown.

Buyers from the mainland have been responsible for up to a third of sales since the city dropped extra stamp duties on foreign buyers late last month.

Several property agents and developers have noted the surge into the market, which is classed as one of the world’s most expensive. It follows a more than three-year lull in the sector because of the Covid pandemic.

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Mainland Chinese now account for 20% to 30% of new home sales, according to estimates by realtors, with some buyers recently purchasing up to eight apartments at once.

In late February, Hong Kong removed all additional stamp duties, including those for purchases of second properties, as well as duties on those selling flats within two years of buying them.

Foreigners, who had to pay 15% tax since October, from 30% previously, now pay around 4.25%, on par with locals.

Prices still flat

The reversal of what was deemed an unsuccessful government push during the 2010s to cool housing prices came after Hong Kong housing prices plunged more than 20% from their 2021 peak due to higher mortgage rates, an outflow of talent and a weak market outlook.

But even though sales have risen, prices remain suppressed as developers offer discounts to clear inventory. S&P Global Ratings estimated transaction volumes this year would recover only moderately from 2023, as interest rates remain high.

Property remains a mainstay of the Hong Kong economy, and the share of purchases by mainland Chinese climbed to 17%, a record high, in the fourth quarter of last year, research by realtor Midland Realty showed.

The increase coincides with a bid by the Hong Kong government to attract talent by waiving an additional stamp duty for foreign buyers, unless they fail to gain citizenship after seven years.

Now, that share has risen further to around 30% in the primary market, Midland said, based on their internal sales.

At a new launch this month by Wheelock Properties and MTR Corp, mainland Chinese professionals planning to move to Hong Kong accounted for around 20% of those who had expressed an intention to buy, the developer said.

Shenzhen citizens interested

Some mainland Chinese are buying in bulk.

Two weeks ago, major property developer Henderson Land sold all 30 apartments on offer at a launch event, according to realtor Centaline. Two buyers bought eight apartments each, and one of them, who spent HK$42 million ($5.4 million) in total, was from mainland China.

In another Henderson development in Kowloon district, a mainland Chinese buyer bought five apartments totalling HK$25 million, according to media reports.

Developers including CK Asset and New World Development have also said they would do more marketing aimed at mainland Chinese.

Buyers in Shenzhen are particularly interested in Hong Kong, property agents say. The southern city and business hub borders the city.

Alan Cheng, CEO of southern China of Centaline Property Agency, said the company had received more than 1,500 enquiries from Shenzhen about Hong Kong property and completed eight transactions in the last two weeks.

“We have clients who have never cared about Hong Kong but are now asking about the threshold and yield for investing in a property,” he said.

“They heard Hong Kong is a good market.”