Hong Kong sees surge in property transactions after easing stamp duty rules

In the first quarter of 2025, Hong Kong's residential market experienced a notable shift following a government announcement that raised the maximum value chargeable at a stamp duty level from HK$3 million to HK$4 million. This policy change took place in February and prompted a resurgence in activity among first-time home buyers and investors. The altered stamp duty policy, coupled with a positive stock market performance, contributed to improved sentiment within the residential sector. In March, transaction numbers saw a significant rise of more than 5,300 units, marking an uptick from the low levels experienced in January. Despite this revival, the overall residential prices continued to decline, albeit at a gradually narrowing rate. By February, residential prices had dropped by 0.9% month-on-month, resulting in a cumulative decline of 1.6% for the first two months of 2025. This context underlines the complexity of the current market dynamics where price reductions coexist with increased transaction volume. The retail market in Hong Kong, while witnessing a growth in tourist arrivals in Q1, struggled to translate this into improved retail sales performance. The overall retail sales recorded during January and February amounted to HK$64.8 billion, reflecting a year-on-year decline of 7.8%. High-street retail rents, especially in core districts like Tsimshatsui and Causeway Bay, also witnessed slight adjustments. Despite the pressure on rents, many retailers perceived the current levels as attractive, suggesting potential for renewed interest and leasing demand. The Grade A office market experienced its sixth consecutive quarter of positive net absorption, with 143,700 square feet absorbed in Q1 2025. The new demand was primarily led by sectors like banking and finance, despite high availability levels resulting from new supply, which put further pressure on rental rates. Over the coming quarters, substantial new office space is set to enter the market, likely influencing the trajectory of rental levels and overall market sentiment, especially in the finance sector that could benefit from the recovery of Hong Kong's IPO pipeline.