The new stamp duty policy in Hong Kong has been relaxed again! The transaction of low-priced buildings has reached a ten-year high!

Hong Kong's property market policies have delivered further positive developments, with stamp duty adjustments targeting the affordable housing segment precisely addressing the pain points of first-time buyers, directly triggering a surge in transactions during the first quarter. The significant measure in the late-February Budget, raising the upper limit for the ‘HK$100 stamp duty’ from HK$3 million to HK$4 million, not only saved buyers nearly HK$60,000 in tax costs but also fully unleashed pent-up property demand. This propelled transactions for affordable properties below HK$4 million to surge by 137.7% quarter-on-quarter, accounting for nearly half of all transactions that quarter and setting a record high for a single quarter since 2013, injecting robust momentum into Hong Kong's property market recovery.

The dividend effect of this stamp duty adjustment proved remarkably swift. Under the previous policy, a HK$4 million property incurred a 1.5% stamp duty levy, amounting to HK$60,000 – a significant additional expense for first-time buyers operating on constrained budgets. Following the new policy's implementation, properties of the same value now incur a stamp duty of merely HK$100 – representing a reduction in tax costs exceeding 99% and substantially lowering the barrier to entry. ‘I'd been hesitating due to the tax burden, but the new policy saved me half a year's salary outright. I finally felt confident enough to commit to buying,’ Ms Wong, a mainland-born white-collar professional in Hong Kong, articulated the predicament faced by many first-time buyers. She recently purchased a second-hand compact flat in Kowloon, where the monthly mortgage payment is comparable to her previous rent. The reality that ‘mortgage payments are cheaper than rent’ prompted her to decisively end her renting days.

The release of policy dividends, coupled with developers' sales strategies, has jointly propelled a surge in transactions for compact flats. First-quarter new property supply in Hong Kong has notably skewed towards the mid-to-low price bracket. Key projects such as YOHO WEST PARKSIDE in Tin Shui Wai and Long Tin Fung in Yuen Long have released substantial numbers of units priced below HK$4 million. Many attracted overwhelming applications through pricing below market expectations and comprehensive amenities. Take Kowloon City's new development ‘South Summit’ as an example: its first batch of units, with discounted prices hovering near the HK$4 million mark, drew 7,000 subscription registrations vying for 181 units – equivalent to 37 applicants per flat – thanks to its prestigious school catchment. The project sold out on launch day, epitomising the first quarter's fervour for affordable housing.

From a transaction structure perspective, affordable housing has become the dominant force in Hong Kong's property market during the first quarter. Data indicates that combined transactions for both new and resale properties priced below HK$4 million accounted for nearly 50% of the total in the first quarter, meaning one in every two property transactions involved affordable housing. The primary market performed particularly strongly, with 901 new home transactions below HK$4 million recorded in the quarter. March alone contributed 442 of these, accounting for nearly half the quarterly total, clearly demonstrating the new policy's stimulus effect on the new development market. Analysts from Midland Realty note that this surge in affordable property transactions is no coincidence, but rather the result of multiple factors converging: policy incentives, a low-interest-rate environment, and market valuations bottoming out. Particularly, the widespread phenomenon of ‘mortgage payments being cheaper than rent’ has further encouraged tenants to transition into buyers.

Notably, the vibrancy of the affordable property market extends beyond transaction volumes, driving regional market differentiation and recovery. The most active affordable housing projects in Q1 were concentrated in New Territories areas such as Tin Shui Wai, Tuen Mun, and Yuen Long. These districts, with their relatively accessible prices and continuously improving infrastructure, have become the preferred choice for first-time buyers. Concurrently, the secondary affordable housing market has also heated up, with many owners seizing the opportunity to list their properties. This has created a virtuous cycle of robust buying and selling activity, effectively enhancing market liquidity.