Hong Kong cuts property taxes, eases visa rules to attract global talent

Hong Kong Chief Executive John Lee unveiled a sweeping plan to woo talent back to the city and ease its housing woes, in a bid to revive its status as a thriving international finance hub.
 

The city leader in his maiden policy address on Wednesday announced he would cut property duties for non-permanent residents and ease visa rules to reverse a brain drain prompted by years of isolationist Covid policies. His proposals to make property more affordable answered Beijing’s call to fix the hub’s notorious housing market, which Chinese officials have blamed for political unrest in the city.

Lee, who took office in July, has a tough road ahead of him as Hong Kong’s economy limps toward the end of the year. Gross domestic product is projected to contract for the third time since 2019 as fallout from Covid restrictions, rising interest rates, global inflation and Russia’s war in Ukraine all pummel growth.

“The world is undergoing profound changes unseen in a century,” Lee said, citing some of those factors as having “weakened the growth momentum of the global economy.”

The visa and property rules were most keenly watched on Wednesday for signs of how Lee intended to revive the city’s economy and its competitiveness among rival financial hubs, chiefly Singapore. The Southeast Asia city-state has been trying to lure talent and business away from Hong Kong with its own new visa program and a faster, more aggressive rollback of Covid restrictions. 

The Hang Seng Index was down 1.8% at 1:36 p.m. local time as Lee was delivering his address. A sub-index of property developers was down 0.8%, erasing gains before his speech of 2.8%.

Countering Singapore
 

Lee outlined a two-year visa program for people who bring in at least HK$2.5 million ($318,480) annually that will allow them to to explore opportunities in Hong Kong without being subject to any quota. Recent graduates of the world’s top 100 universities will also be eligible for work visas, he added.

The city will also suspend the annual quota of its current program for skilled talent and extend the limit of stay for non-local graduates from one to two years. 

The proposal comes two months after Singapore announced its own five-year work visa program for foreigners earning S$360,000 ($253,530) annually, citing a hypercompetitive battle for global talent. 

While Hong Kong has relaxed its toughest Covid restrictions in recent weeks -- in September, Lee announced an end to hotel quarantine for travelers -- it has trailed Singapore, which this spring dropped many of its most prohibitive curbs and has been outspoken about needing to position itself as a premier financial hub and global city.

The university visa program, meanwhile, echoes a similar talent incentive program in the United Kingdom, which earlier this year launched a two-year visa plan for jobseekers who have graduated from top-ranked universities in the last five years.

Property Proposals
 

A much-anticipated change to property rules included a plan to refund extra stamp duties that non-permanent resident property buyers have to pay after they have stayed in the city for seven years. 

Once they have become permanent residents, those buyers can apply for refunds of two separate stamp duties that are each fixed at 15%. They still have to pay for another duty capped at 4.25%, as the city’s permanent residents do.

Hong Kong’s property market is one of the world’s most expensive, and the sector has been slumping as a result of rising rates and a population outflow. 

Secondary home prices have dropped 8% since the start of the year and are on track to approach a five-year-low. Goldman Sachs Group Inc. expects home prices to plunge 30% through 2023 from last year’s levels.

The easing or lowering of stamp-duty rates for non-local buyers could attract demand, particularly from mainland Chinese interested in luxury residential properties, said Patrick Wong, a real estate analyst with Bloomberg Intelligence ahead of the policy address. The impact on sales of mass residential projects could be limited until there is more clarity on how high mortgage rates could go, he added.

To help more people access the housing market’s costly barrier to entry, Lee also detailed a proposal to expand homeownership. He vowed to increase overall public housing production by about 50% in the coming five years.

National Security
 

Lee also used his address, his most important speech since taking office in July, to express his gratitude to Chinese President Xi Jinping. The city leader said Xi’s Sunday speech at a major congress in Beijing would serve as his “blueprint” for governing Hong Kong.

In that address, Xi credited a national security law enacted in June 2020 -- along with an electoral overhaul to ensure governance under approved “patriots” -- with restoring order to the city. The Chinese leader also stressed the “one country, two systems” governance model in Hong Kong “must be adhered to over the long term.”

National security has been a key theme of policy addresses in recent years, and Lee made clear it’s still a priority. He emphasized the city must remain vigilant to threats and recommitted to implementing Hong Kong’s own local security law, Article 23, without setting any timeframe for achieving this.

Other details from Lee’s policy address:

• Hong Kong will set aside HK$30 billion ($3.8 billion) to establish a “Co-Investment Fund” for attracting companies to set up operations in Hong Kong and investing in their business
• Hong Kong will match China’s development policies to inject energy into the city’s development, to solidify its role as a regional hub
• The city’s stock exchange will revise the mainboard listing rules next year to facilitate fundraising, and to revitalize the Growth Enterprise Market, a market with lower listing eligibility criteria
• The Hong Kong Monetary Authority is starting preparation on digital Hong Kong dollars
• The city aims to attract 100 high-potential innovation and technology enterprises to the city to boost economic value and jobs
• Hong Kong will promote its fintech industry, offer tax concessions to family offices