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The abyss of debts could destroy Hong Kong economy
2024-1-13
Year-to-date, the Hang Seng Index has fallen constantly, indicating a gloomy investment outlook. The government announced earlier that the partial spicy measures related to the property market would be confiscated, however the market reaction was calm, and the property transaction did not increase significantly. Furthermore, the government stopped t he sale of residential land during the first quarter of this year and the developers refused to pay the land premium for the residential land in the Northern Metropolis, which may eventually lead to the halt of this newly development area.
This year, the government's fiscal deficit has been deteriorating. The government is not able to deal with it and do not know when the deficit can be eliminated. Last year, the income from land sale was less than Hk $ one hundred forty billion, which was far from the initial estimate of eighty billion. The fiscal deficit in 2023 years is about one hundred billion, the shortfall of the income from land sale was as much as fifty percent of the fiscal deficit.
The government will announce a new yearly budget at the end of February, which could include that the spicy measures will completely be withdrawn. In addition, if the announcement provides additional measures such as the interest subsidies for the first-time property buyers, this will contribute to increasing the transaction volume of the property market.
At present, the government's fiscal deficit is serious, so it is imperative to eradicate it. If the government wants to use the asset appreciation tax to increase tax revenue, this may be counterproductive, as the market is already poor, and the additional tax will only further undermine public confidence in entering the market, resulting in a further reduction in transaction volume and property prices, and making land sale more difficult to return to normal volumes.
If the land sale is unable to recover to one hundred billion revenue per year, the issue of the government's fiscal deficit will not be resolved. With a huge and persistent deficit, the northern metropolis development project must depend on issuing hundreds billion of bond every year so that it can provide funding to first phase of development. Under this vicious circle of debts, Hong Kong will fall into the abyss of debts.
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1. Public consultation for 2024-25 budget 2024-01-13 12:29:34 |
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The government has kicked off its public consultation exercise for the 2024-25 budget. Despite the growth in Hong Kong’s economy, the strength of the city's recovery post-pandemic is weaker than expected due to factors such as high-interest rates and geopolitical developments. Through the 2024-25 budget, the government will focus on stability and allocate resources to drive economic growth to bring tangible benefits to people. The public can submit their feedback via the budget’s website or by email. |
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2. Shop rents are significant declines 2024-01-14 09:54:47 |
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Amid an economic downturn, shop rents in core areas of Hong Kong are seeing significant declines and creating opportunities for an increase of eyecatching lease deals in the retail market. International giants and top brands are staking out strategic locations in Hong Kong's premier districts such as Central, Tsim Sha Tsui and Causeway Bay, snapping up large retail spaces. That allows them not only to set themselves apart with a possible statement on the grandeur of luxury but also gives them a chance to possibly pioneer innovative retail approaches. Chanel is one such brand, setting itself up on the ground and first floors at Causeway Bay's Capitol Centre in June by committing to a three-year lease at a monthly rent of more than HK$3 million - which, despite the money involved, is actually much lower than the HK$13.8 million the space fetched at its peak |
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4. Preferred overseas destinations of parents in Hk 2024-01-16 10:40:01 |
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The United States, United Kingdom, Canada and Australia remain the preferred destinations of parents in Hong Kong and China when choosing a location to send their children to study. Data from HSBC Life showed that Singapore and Japan (16%) have also emerged as top picks for overseas education by parents in China and Hong Kong. There has also been an increasing intention for cross-border education between mainland China and Hong Kong. About 7% of respondents from Hong Kong are considering mainland China as an education option, whilst 6% of mainland China respondents are looking to Hong Kong for future education opportunities. |
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5. Com will benefit reporting misuse flats 2024-01-17 16:19:33 |
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Property management companies will benefit in future Housing Department project management tenders if they successfully report abuse or violation of public rental housing flats to authorities, says Director of Housing Rosanna Law Shuk-pui. The reward system comes after the department recovered 2,100 public rental housing units up to the middle of last month since it issued forms to 88,000 units for tenants to declare whether they own domestic properties in Hong Kong and whether they continuously live in the units, as well as after randomly inspecting 30,000 flats. Law said the bonus-point system will incentivize property management firms to pay greater attention to suspected violations or misuse of public housing. |
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6. HK investors strong intentions to sell assets 2024-01-18 23:26:36 |
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Hong Kong expects to witness a repricing of office assets in 2024.
Hong Kong investors have strong intentions to sell assets in 2024, CBRE reported.
Investors in the region also exhibited the weakest buying intentions at -11%. CBRE said the weak buying intention is likely due to significant capital value declines in the local market.
Meanwhile, CBRE said build-to-sell solutions will be in demand for Hong Kong investors in 2024.
CBRE also expects Hong Kong to witness the further repricing of office assets in 2024. |
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