Hong Kong Sees 4%-5% Growth In 2010, Raises Duty On Luxury Properties

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Wednesday, Hong Kong's Financial Secretary John Tsang announced new measures to prevent volatility in the property market. He also forecast 4% to 5% economic growth for 2010 in his annual budget speech for fiscal year 2010-11.

To curb speculation and reduce the risk of asset bubbles, Tsang said a higher rate of stamp duty would apply on properties valued at more than HK$20 million from April 1. Stamp duty on such transactions will rise to 4.25% from 3.75%. If there is excessive speculation in the trading of properties valued below HK$20 million, the government will consider extending the measures to those transactions.

The government will strive to prevent an excessive expansion of mortgage lending that might fuel an asset price bubble, added Tsang. "The measures announced strike a balance between reducing the risk of a property bubble and preventing public policies from causing unnecessary fluctuations in the property market."

Since the fourth quarter of 2008, inflow of funds exceeded HK$640 billion raising the potential risk of creating asset-price bubbles. In response to the government's request, the MTR Corporation Limited and the Urban Renewal Authority quickened the pace of bringing residential sites to the market to increase the supply of flats in the coming few years.

Tsang, who presented his third budget, proposed salaries tax reduction of 75% for 2009-10, subject to a ceiling of HK$6,000. This measure will cost the government HK$4.5 billion and benefit all 1.4 million taxpayers.

The Financial Secretary estimated a larger than expected surplus of HK$13.8 billion for 2009-10. He forecast a deficit of HK$25.2 billion for 2010-2011 and expected a return to fiscal balance by 2013-14.

Hong Kong's economy expanded 2.6% in real terms in the fourth quarter over a year earlier, in contrast to the 2.2% decrease in the third quarter. On a sequential comparison, GDP grew 2.3%. As the Mainland economy returned to faster growth and the European and the U.S. economies began to stabilize, Hong Kong recovered from recession in the second quarter of 2009. For 2009 as a whole, GDP contracted 2.7%.

Tsang forecast GDP growth of 4% to 5% for 2010. He said he is cautiously optimistic about Hong Kong's economic prospects for 2010. The road ahead may not be smooth, Tsang added. He also predicted mild inflation of 2.3% for the year.

Wednesday, Hong Kong's Financial Secretary John Tsang announced new measures to prevent volatility in the property market. (Market News Provided by RTTNews)