febrero 29 2024

Hong Kong Budget 2024-25: Key Highlights of Property Measures

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Hong Kong Financial Secretary Paul Chan delivered the 2024-2025 Budget on 28 February 2024. This Legal Update highlights a few aspects relevant to the real estate industry.

Cancellation of Stamp Duty Measures 

The government cancels all demand-side management measures for residential properties with effect from 28 February 2024. This means that no more special stamp duty (SSD), buyer's stamp duty (BSD) or new residential stamp duty (NRSD) is payable for residential property transactions. Sellers and buyers of residential properties are still required to pay ad valorem stamp duty (AVD) at the same rates as Scale 2 rates (from HK$100 up to 4.25% of the consideration) – see table below (HK$).

Amount or Value of the Consideration
(Whichever Is the Higher)
AVD Scale 2 Rates
Exceeds Does Not Exceed
- $3,000,000 $100
$3,000,000 $3,528,240 $100 + 10% of excess over $3,000,000
$3,528,240 $4,500,000 1.5%
$4,500,000 $4,935,480 $67,500 + 10% of excess over $4,500,000
$4,935,480 $6,000,000 2.25%
$6,000,000 $6,642,860 $135,000 + 10% of excess over $6,000,000
$6,642,860 $9,000,000 3%
$9,000,000 $10,080,000 $270,000 + 10% of excess over $9,000,000
$10,080,000 $20,000,000 3.75%
$20,000,000 $21,739,120 $750,000 + 10% of excess over $20,000,000
$21,739,120 - 4.25%

The AVD rates for residential and non-residential property transactions are now aligned. There will be no more differential treatment between (a) residential and non-residential property transactions; (b) buyers who are Hong Kong Permanent Residents (HKPR) and those who are not. Corporate buyers and non-HKPR buyers, whether buying residential properties, offices, shops, parking spaces, are all liable to the same AVD Scale 2 rates.

Public Revenue Protection (Stamp Duty) Order 2024 with the draft bill to amend the Stamp Duty Ordinance (Cap. 117) to give effect to the changes mentioned in the 2024-2025 Budget has been gazetted. The government has four months to introduce the bill to the Legislative Council to enact the bill into law. 

Hong Kong Monetary Authority (HKMA) to Raise Loan-to-value (LTV) Caps for Mortgage Loans, Suspend Stress Test and Alleviate Financial Caps for Property Development Projects

The HKMA issued a circular on 28 February 2024 to licensed banks to raise LTV caps for both residential and non-residential mortgage loans and suspended the stress test requirement, all becoming effective on the same day.

  • Maximum LTV for mortgage loan for residential properties (for self-use) is raised to 70% for property value or consideration equal to HK$30 million or below; and to 60-70% for property value or consideration between HK$30 million but not more than HK$35 million; and to 60% for property value or consideration above HK$35 million.
  • Maximum LTV for mortgage loan for residential properties (not for self-use) is raised to 60%, irrespective of the property value or consideration.
  • Maximum LTV for mortgage loan for non-residential properties (such as offices, shops and car parking spaces) is raised to 70%, irrespective of the property value or consideration.

Further, the HKMA also alleviates financing caps for property development projects. Overall, financing cap of the expected value of the completed site increases from 50% to 60% (within which there will be 50% cap of site value (previously 40%) and 100% cap of construction costs (previously 80%)). Such move will revert the relevant caps to pre-May 2017 levels, enhancing the flexibility for developers to obtain sufficient financing for their development projects.

Previously, with financing construction costs subject to 80% cap, there was a common problem that developers needed to obtain other means of financing for the remaining 20% of the construction costs. 

Under the Consent Scheme of the Lands Department – in order to obtain the consent (commonly known as "presale consent") from the Director of Lands to enter into agreements for the sale and purchase of the units in the development prior to issuance of the certificate of compliance – developers must provide proof of acceptable means of financing of outstanding construction costs to the Lands Department, in the form of building mortgage and/or financing undertaking issued by a licensed bank or registered deposit-taking company. 

This is to ensure that there would be sufficient money to complete the construction of a development, even if the developer is unable to carry on the construction for whatever reason. 

With a cap of financing of construction costs at 80%, a developer was often asked to procure the issuance of finance undertaking by a licensed bank or registered deposit-taking company to finance the remaining 20%, incurring additional financing costs and complicating the application for presale consent. 

With the financing cap reverting back to pre-May 2017 levels, developers may obtain financing of 100% of construction costs in the form of building mortgage without the need to procure another financing undertaking.

Progressive Rating System for Residential Properties

A new progressive rating system for residential properties will be introduced from the 4th quarter of 2024-2025 onwards to generate government revenue. This revamp of the rating system was first mentioned by the Financial Secretary in the 2022-2023 Budget.

Instead of a fixed 5%, rates will be charged at progressive percentages (5%, 8%, 12% respectively) based on the rateable value of the residential properties.

For residential properties with a rateable value of HK$550,000 or below, the percentage remains 5%. It increases to 8% for the portion of rateable value between HK$550,000 and HK$800,000, and further to 12% for the portion above HK$800,000.

The new system will affect residential properties with a rateable value over HK$550,000, which are said to account for about 1.9% of residential properties.

This new system primarily impacts luxury homes, aligning with the "affordable users pay" principle adopted by the government, and is expected to generate HK$840 million annually for the government.

Non-residential properties will remain unaffected.

Proposed Progressive Rating System for Domestic Tenements Effective from the Quarter of January to March 2025 Onwards
Annual Rateable Value (RV) of Domestic Tenements (Monthly RV) Rates Percentage Charges 
$550,000 or below 
(Monthly RV at $45,833 or below)
5% (remains unchanged)
$550,001-$800,000 (Monthly RV at around $45,833 to $66,667) First HK$550,000: 5%
Next HK$250,000: 8%
Above $800,000 
(Monthly RV at above $66,667)
First HK$550,000: 5%
Next HK$250,000: 8%
Portion above HK$800,000: 12%

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