This year's Policy Address was announced on 16 October 2024. The Government has introduced a series of measures to boost the economy and improve people's livelihood, and the following are some of the measures that we believe will have an impact on the local property and real estate markets:
Relaxation of the loan-to-value ratio ceiling
- The maximum loan-to-value ratio for residential properties was adjusted to 70% and the maximum loan-to-income ratio was adjusted to 50% across the board.
- For non-residential properties, the maximum loan-to-value ratio and the maximum loan-to-income ratio will also be adjusted to 70%.
Projected Impact:
- Encouraging property transactions and lowering the entry
threshold will release more purchasing power. After the full
relaxation of mortgage, the mortgage loan-to-value ratio will be
capped at 70% regardless of the value of the property and whether
it is self-occupied or not, which may attract more potential
buyers, investors, or rent collectors to enter the market.
- Raising the maximum loan-to-income ratio to 50% across the
board is in line with that for owner-occupied properties, and this
applies to all residential and non-residential properties.
Eliminating the 10% reduction in the loan-to-value and
repayment-to-income ratios for mortgage applicants who have
borrowed or guaranteed other mortgaged properties at the time of
applying for a mortgage is clearly a relaxation of the restriction
on the purchase of a second or more properties by those who already
own a property, reverting the policy to what it was before any of
the "spicy measures" introduced by the Government back
then.
- It is expected that the market will remain cautious about the future and there may not be a significant stimulus to the property market in the short term. If the market anticipates an upcoming interest rate cut cycle, it may lead to a more favourable trend in property transactions.
Enhancement of the New Capital Investment Entrant Scheme
- Investment in residential property is permitted provided that the transaction price of the property is $50 million or more and the maximum amount of investment in real estate to be counted towards the total investment is $10 million.
Projected Impact:
- It has the potential to boost the high-priced residential
property market, but the cap on total investment of $10 million may
limit its appeal and restrict the choices available to potential
investors.
- Setting the threshold at $50 million or above may be to avoid excessive impact on the major residential market, but if it is to have an effect on the market in the short term, setting the threshold at a lower level and then gradually adjusting it upwards will have a quicker impact on the market.
Acceleration of youth and student hostel projects
- Subsidising NGOs to rent suitable hotels and guesthouses for conversion into youth hostels. The number of hostel places has now increased to about 3,000.
- To remove barriers and restrictions with respect to planning, lands and building plan approvals, and to encourage the market to increase the supply of student hostels by converting hotels and other commercial buildings on a self-financing and private basis.
Projected Impact:
- The hospitality sector has been hit hard by the current
restructuring of the travel industry and many small and
medium-sized hotel owners have put their properties up for sale.
This may help owners find a way out and provide more incentives for
potential investors to consider buying such properties.
- Allowing the market to convert hotels and commercial buildings into student hostels will give under-occupied properties more potential and room for development.
Solving the problem of subdivided flats
- The Housing Bureau will register the sub-divided flats in existing residential buildings for letting and accepting applications for "Plain Housing" accreditation at the same time.
- In the future, "simple houses" will be required to comply with standards on size, fire safety, ventilation and hygiene.
Projected Impact:
- As accidents related to sub-divided units have occurred
multiple times in Hong Kong, the measure may improve the living
environment of tenants of sub-divided units, but on the other hand,
it will increase the costs for owners and managers. Whether the
costs will be passed on to the tenants remains to be seen in the
market response after the implementation of the policy.
- Will the Government consider providing subsidies or incentives
to owners or operators of sub-divided units to carry out the
relevant improvement works and apply for accreditation so as to
give them more incentives to carry out improvement works on their
initiative? How the Government will actually enforce the law and
eradicate substandard sub-divided units, as well as the costs
incurred in the implementation of the policy, are important
considerations.
- Apart from the difficulty in investigating and regulating non-compliant sub-divided units, the policy may also lead to the sudden displacement of tenants of affected sub-divided units, which requires detailed planning and careful handling by government departments.
Improving building design and building management
- To implement a pilot scheme on "Joint Building and Management" within 2025.
- To formulate an "Elderly-friendly Building" scheme to encourage private projects to adopt more elderly-friendly designs proactively.
Projected Impact:
- Better management of the "three nil buildings" will
help improve the property conditions and living environment of the
occupants. However, the distribution of responsibilities amongst
the buildings requires active discussion amongst stakeholders, and
the participation of owners and occupants of these buildings is
doubtful.
- There is an opportunity to encourage developers to develop or convert more projects into elderly-friendly buildings, which could impact their purchasing power. The actual impact will depend on factors such as whether there are resale restrictions or preferential measures for the elderly, or if there are home ownership schemes for them to cope with their standard of living and estate planning for their retirement.
Release of Tso Tong Land in the New Territories
- Continuing to support the Heung Yee Kuk in promoting the enhanced management of tso tongs in the New Territories so as to release the development potential of tso tong sites more effectively.
Projected Impact:
- Substantial policies have yet to be launched, and the relevant policies have been mentioned in the 2021 Policy Address but have yet to see tangible results, pending the formal launch of policies or proposals by various stakeholders.
Strengthening Hong Kong's position as an international financial centre
- Attracting more asset management companies to set up in Hong Kong.
- Promoting overseas enterprises, including those from the Middle East and ASEAN countries, to set up headquarters or offices in Hong Kong.
Projected Impact:
- Bringing more new capital to Hong Kong will boost the local
property investment market.
- There are opportunities to facilitate leasing transactions of commercial properties in Hong Kong.
Accelerating urban renewal
- The Urban Renewal Authority (URA) is conducting a planning study on Tsuen Wan and Sham Shui Po and will put forward an updated outline layout plan in the second half of 2025.
- The Development Bureau is also studying the use of newly developed land to promote large-scale redevelopment projects in old districts, including the transfer of plot ratios across districts.
- The expiry date of the "Revitalisation of Industrial Buildings" measure has been extended to the end of 2027, which includes continuing to allow an increase in plot ratio of up to 20% for industrial building redevelopment projects.
Projected Impact:
- The Government has specified that planning studies will be
conducted for the Tsuen Wan and Sham Shui Po districts, which may
enhance the appreciation potential and investment value of
properties in these districts.
- Allowing the transfer of plot ratios across districts will
increase the flexibility and efficiency of land development and
provide greater incentives for developers to invest and participate
in redevelopment projects in old districts.
- The transfer of plot ratios may lead to an imbalance in the original urban planning and affect the livelihood of local residents, which will in turn affect issues such as environmental protection, traffic and population density.
Caring for the elderly
- Enhancement of the Guangdong Residential Care Services Programme
- To provide more choices and support for elders residing in residential care homes in the Guangdong Province, including increasing the number of participating Residential Care Homes for the Elderly (RCHEs), sharing part of the medical expenses incurred by the participating elders in their home country, and commissioning organisations to provide caring services for the participating elders to assist them in adapting to life in Guangdong.
Projected Impact:
- The gradual transfer of RCHEs and related facilities to the
Guangdong Province or expansion to the Greater Bay Area may cause
Hong Kong operators to reduce the scale of their business in Hong
Kong and switch to developing in the Guangdong Province or the
Greater Bay Area because the operating costs in the domestic market
are lower than those in Hong Kong. If the quality of RCHEs and the
related medical facilities are compatible, we cannot rule out the
possibility that some Hong Kong people will go northward to live in
RCHEs in Guangdong Province or the Greater Bay Area, which in the
long run, will affect the choice of the relevant Hong Kong
operators or potential investors to go to the Guangdong Province or
the Greater Bay Area, or to reduce their investment in RCHEs in
Hong Kong.
The above information is only a summary of some of the important points on the real estate front in this Policy Address. Detailed actual measures and arrangements, as well as their impact on the Hong Kong real estate market, have yet to be followed up and monitored by the relevant Hong Kong Government authorities and various stakeholders.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.