Bloomberg
Hong Kong’s Economy Accelerates Amid Risk of Real-Estate Bubble
February 24, 2010, 02:23 AM EST <!-- Aggregate knowledge -->More From Businessweek
By Sophie Leung and Nipa Piboontanasawat
Feb. 24 (Bloomberg) -- Hong Kong’s economic growth beat estimates in the fourth quarter and Financial Secretary John Tsang forecast an expansion of as much as 5 percent this year as he moved to counter the risk of a property bubble.
Tsang switched today to forecasting a budget surplus for the year through March 31, rather than a deficit, on land sales and extra government revenue from surging property and stock transactions. He announced a higher stamp duty on home sales of more than HK$20 million ($2.6 million) and said measures could be extended to cheaper properties “if there is excessive speculation.”
“It is good that the government is taking a pre-emptive move before a risk in the property market forms,” said Kelvin Lau, a Hong Kong-based economist with Standard Chartered Bank. He said the bank has a similar forecast for GDP this year.
The benchmark Hang Seng Index declined 0.5 percent as of 2:57 p.m. local time. Concerns over monetary tightening in China and European budget deficits have contributed to the benchmark’s drop of about 11 percent from a November high. It climbed 52 percent last year.
Budget Critics
Risks in the second half may include slower export growth, a build-up of inventories that damps demand, and weakness in the U.S. economy, Lau said.
Some analysts said the tax change wasn’t enough to cool the property market and others said the budget lacked long-term measures to boost Hong Kong as a financial center competing against rivals such as Singapore.
Today’s one-off measures included a salaries tax rebate capped at HK$6,000 and waivers of property rates -- limited to HK$1,500 a quarter -- and business registration fees. The government also gave aid to the poor and people in public housing.
Accounting firm KPMG China said budget handouts amounted to HK$19 billion, down from HK$30 billion a year earlier.
“This budget, like the one in the previous year, lacks longer-term fiscal policies to promote sustainable growth,” said Irina Fan, a Hong Kong-based economist at Hang Seng Bank Ltd. She advocated cutting income tax “to increase the city’s international competitiveness.”
Bigger Fiscal Reserves
Tsang forecast an increase in the city’s fiscal reserves to HK$508.2 billion by March 31.
Hong Kong will probably post a HK$13.8 billion budget surplus for this fiscal year, he added. That compares with his forecast a year ago for a HK$39.9 billion deficit. He estimated a HK$25.2 billion deficit for 2010/11.
Singapore’s budget this week included S$5.5 billion ($3.9 billion) of spending over five years through tax benefits, grants and training subsidies to spur productivity.
Nicole Wong, a Hong Kong-based real-estate analyst at CLSA Asia-Pacific Markets, said the stamp-duty increase was “lip service” as the measure will affect only about 2 percent of the property market.
A stimulus-driven rebound in mainland China, the fastest- growing major economy, is aiding Hong Kong via demand for exports and financial services and 18 million tourist arrivals in 2009.
Exports, Retail Sales
Overseas shipments climbed for a second month in December, rising 9.2 percent from year-earlier levels, which were depressed by the financial crisis. Retail sales increased by the most in 20 months.
Unemployment is at an 11-month low as companies such as Standard Chartered Plc and HSBC Holdings Plc hire staff and the asset-price gains are also bolstering retail spending.
Stamp duty on luxury properties will rise to 4.25 percent from 3.75 percent from April 1 and the government will increase the supply of land and residential apartments, Tsang said. The government wants to reduce the risk of “a property bubble” and keep housing affordable, he said.
For all of 2009, Hong Kong posted a 2.7 percent contraction, the first decline in 11 years, as goods exports fell a record 12.6 percent, Tsang said.
Withdrawing Stimulus
Chief Executive Donald Tsang said Feb. 22 that officials will “stay vigilant” as nations withdraw stimulus measures and inflows of capital push up asset prices and threaten to fuel inflation. The government today forecast a 2.3 percent gain in consumer prices this year.
Low mortgage rates drove a 29 percent gain in home prices last year, with officials raising down-payment requirements for luxury homes in October and Hong Kong Monetary Authority head Norman Chan warning this month of the threat of asset bubbles.
In the latest example of surging real-estate demand, Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, reported selling 900 homes for HK$4.2 billion, or an average of HK$5,400 per square foot, on Feb. 20 and 21. That compared with HK$3,000 in the suburban Yuen Long area a year ago, Centaline Property Agency Ltd. said.
Capital Economics Ltd. and Deutsche Bank AG both forecast that Hong Kong’s economy will expand 6.5 percent this year. That compares with estimates of 5 percent from Bank of East Asia and 3.5 percent from Hang Seng Bank Ltd.
--With assistance from Marco Lui, Frederik Balfour, Hanny Wan and Michael Munoz. Editors: Paul Panckhurst, Dirk Beveridge.
To contact the reporter on this story: Sophie Leung in Hong Kong at +852-2977-6126 or [email protected]
To contact the editor responsible for this story: Chris Anstey at +65-6212-1130 or [email protected]
HKGDQOQ <INDEX> CN HKGDYOY <Index> CN HSGDPAGR <Index> CN HKPFTTL <Index> CN HKPFYTL <Index> CN
Hong Kong’s Economy Accelerates Amid Risk of Real-Estate Bubble
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By Sophie Leung and Nipa Piboontanasawat
Feb. 24 (Bloomberg) -- Hong Kong’s economic growth beat estimates in the fourth quarter and Financial Secretary John Tsang forecast an expansion of as much as 5 percent this year as he moved to counter the risk of a property bubble.
Tsang switched today to forecasting a budget surplus for the year through March 31, rather than a deficit, on land sales and extra government revenue from surging property and stock transactions. He announced a higher stamp duty on home sales of more than HK$20 million ($2.6 million) and said measures could be extended to cheaper properties “if there is excessive speculation.”
“It is good that the government is taking a pre-emptive move before a risk in the property market forms,” said Kelvin Lau, a Hong Kong-based economist with Standard Chartered Bank. He said the bank has a similar forecast for GDP this year.
The benchmark Hang Seng Index declined 0.5 percent as of 2:57 p.m. local time. Concerns over monetary tightening in China and European budget deficits have contributed to the benchmark’s drop of about 11 percent from a November high. It climbed 52 percent last year.
Budget Critics
Risks in the second half may include slower export growth, a build-up of inventories that damps demand, and weakness in the U.S. economy, Lau said.
Some analysts said the tax change wasn’t enough to cool the property market and others said the budget lacked long-term measures to boost Hong Kong as a financial center competing against rivals such as Singapore.
Today’s one-off measures included a salaries tax rebate capped at HK$6,000 and waivers of property rates -- limited to HK$1,500 a quarter -- and business registration fees. The government also gave aid to the poor and people in public housing.
Accounting firm KPMG China said budget handouts amounted to HK$19 billion, down from HK$30 billion a year earlier.
“This budget, like the one in the previous year, lacks longer-term fiscal policies to promote sustainable growth,” said Irina Fan, a Hong Kong-based economist at Hang Seng Bank Ltd. She advocated cutting income tax “to increase the city’s international competitiveness.”
Bigger Fiscal Reserves
Tsang forecast an increase in the city’s fiscal reserves to HK$508.2 billion by March 31.
Hong Kong will probably post a HK$13.8 billion budget surplus for this fiscal year, he added. That compares with his forecast a year ago for a HK$39.9 billion deficit. He estimated a HK$25.2 billion deficit for 2010/11.
Singapore’s budget this week included S$5.5 billion ($3.9 billion) of spending over five years through tax benefits, grants and training subsidies to spur productivity.
Nicole Wong, a Hong Kong-based real-estate analyst at CLSA Asia-Pacific Markets, said the stamp-duty increase was “lip service” as the measure will affect only about 2 percent of the property market.
A stimulus-driven rebound in mainland China, the fastest- growing major economy, is aiding Hong Kong via demand for exports and financial services and 18 million tourist arrivals in 2009.
Exports, Retail Sales
Overseas shipments climbed for a second month in December, rising 9.2 percent from year-earlier levels, which were depressed by the financial crisis. Retail sales increased by the most in 20 months.
Unemployment is at an 11-month low as companies such as Standard Chartered Plc and HSBC Holdings Plc hire staff and the asset-price gains are also bolstering retail spending.
Stamp duty on luxury properties will rise to 4.25 percent from 3.75 percent from April 1 and the government will increase the supply of land and residential apartments, Tsang said. The government wants to reduce the risk of “a property bubble” and keep housing affordable, he said.
For all of 2009, Hong Kong posted a 2.7 percent contraction, the first decline in 11 years, as goods exports fell a record 12.6 percent, Tsang said.
Withdrawing Stimulus
Chief Executive Donald Tsang said Feb. 22 that officials will “stay vigilant” as nations withdraw stimulus measures and inflows of capital push up asset prices and threaten to fuel inflation. The government today forecast a 2.3 percent gain in consumer prices this year.
Low mortgage rates drove a 29 percent gain in home prices last year, with officials raising down-payment requirements for luxury homes in October and Hong Kong Monetary Authority head Norman Chan warning this month of the threat of asset bubbles.
In the latest example of surging real-estate demand, Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, reported selling 900 homes for HK$4.2 billion, or an average of HK$5,400 per square foot, on Feb. 20 and 21. That compared with HK$3,000 in the suburban Yuen Long area a year ago, Centaline Property Agency Ltd. said.
Capital Economics Ltd. and Deutsche Bank AG both forecast that Hong Kong’s economy will expand 6.5 percent this year. That compares with estimates of 5 percent from Bank of East Asia and 3.5 percent from Hang Seng Bank Ltd.
--With assistance from Marco Lui, Frederik Balfour, Hanny Wan and Michael Munoz. Editors: Paul Panckhurst, Dirk Beveridge.
To contact the reporter on this story: Sophie Leung in Hong Kong at +852-2977-6126 or [email protected]
To contact the editor responsible for this story: Chris Anstey at +65-6212-1130 or [email protected]
HKGDQOQ <INDEX> CN HKGDYOY <Index> CN HSGDPAGR <Index> CN HKPFTTL <Index> CN HKPFYTL <Index> CN
