Hong Kong

Adjustments to Stamp Duty Payable on Residential Properties in Hong Kong

Changes on certain stamp duty payable on residential properties in Hong Kong and other adjustments to manage demand-side measures for residential properties were introduced by the government in the Chief Executive’s 2023 Policy Address (“Policy Address”), which was announced and published on 25 October 2023. These measures reflect the government’s commitment to address the current property market demand and priorities home ownership needs in Hong Kong.

Against the backdrop of tight housing supply and solid demand for property purchase, the Government has since 2010 introduced several rounds of demand-side management measures to curb short-term speculation activities and reduce demand from Non-Hong Kong permanent residents in buying residential homes as investment. This has been done to ensure the steady development of the property market and accord priority to home ownership needs of locals in Hong Kong. Nonetheless, over the past year, interest rates in Hong Kong have risen significantly, various economic sectors have shown moderated growth, and the local residential property market is marked by a decline in number of property transaction, resulting in continuous downward adjustment in property prices.

The adjustments to the demand-side management measures for residential properties

With the expected increase in housing supply in Hong Kong in the coming years, the Hong Kong Government has decided to, with immediate effect from 25 October 2023, make the following adjustments to the demand-side management measures for residential properties:

  1. Shorten the applicable period of the Special Stamp Duty (SSD) from three years to two years
    In other words, if a property owner in Hong Kong disposes his property two years after acquisition (as opposed to three years), he/she will no longer need to pay the SSD, which is at 10% of the property price. This adjustment is done with the aim to provide property owners with more flexibility on the selling of recently bought residential properties.
  2. Reduce the respective rates of the Buyer’s Stamp Duty (BSD) and the New Residential Stamp Duty (NRSD) by half, from 15% to 7.5%
    This arrangement is done with the aim to alleviate financial burden on Hong Kong Permanent Residents (HKPRs) who already own at least one residential property before their acquisition of a second residential property. The stamp duty payable for non-HKPRs in their acquisition of local residential properties will also be lowered.
  3. Introduce a stamp duty suspension arrangement for incoming talents’ acquisition of residential properties
    This is an enhancement of the stamp duty refund arrangement introduced for eligible incoming talents, whereby an incoming talent was originally required to pay the BSD and the NRSD at the time of property acquisition, and be refunded the stamp duty paid when the talent has resided in Hong Kong for seven years and have become HKPR. Under the new suspension arrangement, payment of stamp duty is suspended at the time of property acquisition. Instead, the talent is only required to pay stamp duty if he subsequently fails to meet the requirements and be registered as a HKPR. This new arrangement applies to any sale and purchase agreement entered into from 25 October 2023 onwards.

Conclusion

Overall, the adjustments to the demand-side measures have the potential to influence the property market in Hong Kong by attracting capital from incoming talents, stimulating demand from local residents who wish to buy their second residential properties, and provide greater flexibility to property owners in their buying and selling of properties with a shorter applicable period when SSD becomes payable and a lower BSD payable.

Should you require professional guidance regarding the conveyancing process in light of the adjustments made to stamp duty measures for residential properties in Hong Kong, seeking professional advice is strongly recommended.

 

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