According to a recent survey, Hong Kong's per capita wealth is third in the world after the United States, with a per capita wealth of HK$ 4.3 million. Hong Kong people are still rich, but this cannot be reflected in the stock and property market. The stock market has assessed new lows in recent months. Although property prices did not plummet, the transaction volume had decreased to recent years' low, which will eventually lead to a significant reduction in the government's land sales revenue.
Since May, there have been a sizable number of housing estates with no transactions
for two consecutive months. These low transaction volumes are rare in recent years. The latest low unemployment rate, wages maintain growth, along with the high savings rate of the public, will normally give a staunch support to property transaction. In this scenario, the only reason for the sluggish property market demand is lack of confidence.
If the strong demands are not sufficient, the rental level should be reduced first. However, the falling property price does not result in soft decline of the rental of per square foot. In contrast, it rises slightly by a few percent. The investment return rate of many residential buildings has risen to 3%. If the rents increase to 3 to 5% more, the hesitant buyers will prefer to purchase over lease.
It is worth noting that in the first 5 months this fiscal year, the land premium revenue has been about HK$ 3.4 billion, accounting for only 4% of the projected year's land premium HK$ 85 billion.
It is estimated that the land premium revenue will generate another HK$ 5 billion in the coming last 7 months of this year. If the projection is accurate, the total land premium revenue will only be HK$ 8.4 billion, which is only 9.9% of the total annual budgeted revenue. It indicates that the total land revenue will be HK$ 76.6 billion less than the projection. Moreover, the initial estimate of HK$ 54.4 billion fiscal deficits will increase to HK$ 131 billion.
The most urgent task of the Hong Kong government is to enhance the confidence of the citizens to the property market. The vibrant property market is much more important to vitalize the night market. As potential buyers re-enter the market, developers will naturally have the stronger confidence to buy more lands. As a result, land prices will naturally increase, and the government will directly benefit from the increasing revenue of the land sales. If the property market is not well-regulated, the government's budget deficit will deteriorate from bad to worst.
Since the reopening of the border, the gambling revenues of Macau have risen to 70% before the border closure. It is estimated that the annual gambling revenue will reach MOP$ 100 billion next year, and the government's revenue and expenditures will be balanced. What will the budget deficits of Hong Kong be? Is it possible to achieve balance next year?
