(Yicai) Nov. 20 -- Hong Kong’s property market is showing signs of recovery, as new home sales in the first 10 months of this year exceeded the total of last year, buoyed by favorable factors, such as tax rebates.

Some 15,900 new houses were sold in Hong Kong this year as of Oct. 27, compared with 15,839 in the whole of last year, according to data from Centaline Property. Last month alone, sales exceeded 1,700 units, staying above the 1,000 threshold for the ninth consecutive month.

The recovery of the real estate market in Hong Kong is backed by several factors, such as reduced property purchase taxes, declining mortgage rates, and a steady recovery in rental yields that shifted asset allocation trends.

In February last year, the Hong Kong government announced the cancellation of the Special Stamp Duty, Buyer’s Stamp Duty, and New Residential Stamp Duty. As a result, the stamp duty rates for local homebuyers dropped to 1.5 percent from 7.5 percent, and that for Chinese mainland homebuyers also fell by the equivalent of a 10 percent discount.

With expectations for a US interest rate cut and a recovery in the Hong Kong initial public offering market, the Hong Kong Monetary Authority injected about HKD129.4 billion (USD16.6 billion) liquidity into the market in May. This caused the one-month Hong Kong interbank offered rate to plunge to around 0.7 percent between May and July, bringing the city’s mortgage rates down to about 2 percent.

Hong Kong’s private residential rent index increased for the 10th consecutive month in September, reaching the highest since August 2019, according to the latest data from the Hong Kong Rating and Valuation Department. “From May to July, many tenants directly converted into buyers,” Li Wei, chief operating director at Centaline Property Hong Kong, told Yicai.

A Chinese mainland buyer who recently purchased a property in Hong Kong said that the annual rental yield on his new house is close to 4 percent, far exceeding the 1.5 percent yield on similar properties in neighboring Shenzhen.

The proportion of buyers from the Chinese mainland is also rising. In the first three quarters of the year, the number of property transactions by mainlanders reached 9,900, with a total value of HKD94.1 billion (USD12.1 billion). The full-year total is expected to exceed 12,000, breaking last year’s record of 11,600.

Clients from South Korea and Singapore, including some working at local investment banks and Asian corporations, have also started showing more interest in the Hong Kong property market, Li noted. “It had been a long time since foreigners had bought properties in Hong Kong.”

Hong Kong house prices have rebounded more than 4 percent since March, and they are expected to further increase about 5 percent by the end of next year, according to a report by JP Morgan. This will be mainly because of the wealth effect from a resilient stock market, the release of pent-up demand, an expected decline in mortgage rates, rising rents, solid interest from mainland buyers, and the recovery of the financial industry.

Editor: Futura Costaglione