📋 Key Takeaways
- Rates Concessions Nearly Phased Out: Reduced from a maximum of HK$6,000 annually in the 2020-21 financial year to just HK$500 for the first quarter of the 2025-26 financial year
- Transformative Removal of Stamp Duties: All demand-side management measures (BSD, SSD, NRSD) were abolished on February 28, 2024, driving transaction volumes up by over 50%
- Residential Rental Tax Deduction Continues: The tax deduction of up to HK$100,000 annually for residential tenants will remain in effect at least through the 2026-27 year of assessment
- Base Rates Remain Unchanged: Rates remain at 5% of the rateable value; Government rent (where applicable) remains at 3%
- Significant Market Recovery: Following the removal of stamp duties, property transaction volumes have recovered to approximately 80-90% of pre-pandemic (2019) levels
- Prepare for Full Rates Payments: Property owners should budget to pay full rates starting from the second quarter of the 2025-26 financial year
Remember the greatest challenges Hong Kong's property market faced in decades? The COVID-19 pandemic not only disrupted daily life, but also triggered a massive series of government response measures that reshaped property taxation and concessions over a four-year span. From unprecedented rates concessions to the complete abolition of stamp duty cooling measures, Hong Kong's property market landscape has undergone a dramatic transformation. Let us explore what has changed, what has returned to normal, and what permanent shifts this extraordinary period has brought about.
The Pre-Pandemic Baseline: Hong Kong's Property Market in 2019
Before the COVID-19 outbreak, Hong Kong was one of the world's most expensive real estate markets, with median home prices exceeding 20 times the annual household income. The Government derived substantial revenue from property-related taxes, including multiple "demand-side management measures" aimed at curbing speculation. The basic rates structure at the time was straightforward: rates were charged at 5% of the rateable value, while applicable properties were subject to an additional 3% in Government rent.
Unprecedented Relief: Response Measures During the Pandemic (2020–2023)
When the COVID-19 pandemic hit Hong Kong in early 2020, the HKSAR Government rolled out one of the most comprehensive relief packages in the world. Rates concessions became a cornerstone of economic support, providing direct financial relief to owners of both domestic and non-domestic properties.
Peak Pandemic Concessions: The 2020-21 Year of Assessment
Recognizing the existential threat faced by businesses, the government provided significantly higher concessions for non-residential properties:
| Property Type | Concession Cap per Quarter | Annual Total | Applicable Period |
|---|---|---|---|
| Residential Properties | HK$1,500 per quarter | HK$6,000 | April 2020 - March 2021 |
| Non-residential Properties | HK$5,000 per quarter | HK$20,000 | April 2020 - March 2021 |
Continued Support: 2021-22 and 2022-23 Financial Years
As the pandemic persisted, the government maintained concessions but gradually reduced the relief amounts:
| Financial Year | Annual Concession for Residential Properties | Annual Concession for Non-residential Properties | Background |
|---|---|---|---|
| 2021-22 | Up to HK$5,000 | Up to HK$14,000 | Recurring outbreaks, concession reduced |
| 2022-23 | Up to HK$5,000 | Up to HK$14,000 | Fifth wave of the pandemic, support maintained |
Return to Normalcy: 2024-25 and Beyond
As Hong Kong fully reopened its borders and economic activities returned to normal, the government began to gradually phase out special relief measures. The 2024-25 Budget marked the beginning of a clear return to normal fiscal arrangements:
- Q1 2024-25 (April to June 2024): HK$1,000 concession for all properties
- Q2 to Q4 2024-25: No concession – full rates payable
- Q1 2025-26 (April to June 2025): Planned concession of only HK$500
- Q2 to Q4 2025-26: No concession expected
HK$300 Billion Anti-epidemic Fund: Comprehensive Relief
Rates concessions were only one part of Hong Kong's massive relief package (totalling approximately HK$300 billion, equivalent to about 10% of GDP). The Anti-epidemic Fund provided multi-faceted support:
| Programme | Funding / Impact | Beneficiaries |
|---|---|---|
| Cash Payout Scheme | HK$10,000 per permanent resident | Over 7 million residents |
| Employment Support Scheme | Over HK$90 billion | 1.6 million employees |
| Consumption Voucher Scheme | HK$5,000 to HK$10,000 per person | All eligible residents |
| SME Financing Guarantee Scheme | 100% government guarantee | Thousands of enterprises |
Game Changer: Scrapping of Stamp Duties (February 28, 2024)
In a landmark policy shift, the Hong Kong Government repealed all demand-side property market "demand management measures" effective February 28, 2024. This arguably represents the most significant development in the property market in the post-pandemic era.
Which measures were repealed?
- Buyer's Stamp Duty (BSD): An additional 15% tax levied on non-Hong Kong permanent residents – Repealed
- Special Stamp Duty (SSD): An anti-speculation tax on short-term resales – Repealed
- New Residential Stamp Duty (NRSD): A flat 15% rate applicable to most residential transactions – Repealed
Market Impact: Immediate Rebound
The withdrawal of the stamp duty measures catalyzed a dramatic market recovery:
- Surge in Transaction Volume: Residential transaction volume increased by over 50% in the three months following the withdrawal
- Return of External Capital: Mainland and overseas investors, previously deterred by the 15% BSD, re-entered the market
- Revival of the Secondary Market: Short-term resales became feasible again without SSD penalties
- Current Status (2024–25): Property transaction volumes have recovered to approximately 80–90% of pre-pandemic (2019) levels
Permanent Change: Tax Deduction for Domestic Rent
A measure originating during the pandemic era that remains in place is the tax deduction for rental expenses provided to residential tenants. This represents a structural change to Hong Kong's tax system.
| Item | 2024-25 Details |
|---|---|
| Maximum Deduction | HK$100,000 per year of assessment |
| Eligible Persons | Hong Kong tax residents renting residential properties |
| Main Condition | Taxpayers must not own any residential property in Hong Kong |
| Required Documents | Stamped tenancy agreement and rental receipts |
| Current Status | Provisionally implemented until the 2026-27 year of assessment, with the possibility of becoming a permanent measure |
Example Calculation: Tax Savings Amount
Let's look at how this deduction provides tax relief for a typical tenant in the 2024-25 year of assessment:
Scenario: Ms. Wong earns an annual income of HK$600,000 and rents a residential flat for HK$20,000 per month (HK$240,000 per year). She does not own any property.
Without rental deduction:
- Net chargeable income: HK$600,000
- Less: Basic Allowance (2024-25): HK$132,000
- Net chargeable income: HK$468,000
- Estimated tax (at progressive rates): Approx. HK$70,200
With rental deduction:
- Net chargeable income: HK$600,000
- Less: Rental deduction (cap): HK$100,000
- Less: Basic Allowance: HK$132,000
- Net chargeable income: HK$368,000
- Estimated tax: Approx. HK$54,200
Annual tax savings: HK$16,000
What Remains Unchanged: Basic Tax Rate Structure
Despite all the temporary measures and policy shifts, Hong Kong's core rates assessment system remains unchanged:
Remained Unchanged Since Pre-Pandemic
Rates = Rateable Value × 5%
Government Rent = Rateable Value × 3% (if applicable)
The Rating and Valuation Department continues to assess rateable values based on estimated annual rental values, with properties still being individually assessed according to location, size, age, and facilities. Temporary concession measures only reduced the amounts payable without altering the underlying tax rate structure.
✅ Key Summary
- Rates Concessions Nearly Phased Out: Reduced from a maximum of HK$6,000 per year in 2020-21 to just HK$500 in the first quarter of 2025-26
- Stamp Duty Removal Brought Transformation: All demand-side management measures (BSD, SSD, NRSD) were scrapped on February 28, 2024, driving a transaction volume surge of over 50%
- Domestic Rent Tax Deduction Continues: The tax deduction of up to HK$100,000 per year for residential tenants remains in effect at least through the 2026-27 year of assessment
- Basic Rates Remain Unchanged: Rates remain at 5% of the rateable value; Government rent (if applicable) remains at 3%
- Significant Market Recovery: Following the removal of stamp duties, property transaction volumes have recovered to approximately 80–90% of pre-pandemic (2019) levels
- Prepare for Full Rates Payments: Property owners should budget to pay rates in full starting from the second quarter of 2025-26
Hong Kong's property tax landscape has completed its journey from unprecedented pandemic relief measures back to regular fiscal arrangements. While temporary concessions are nearly at an end, permanent changes such as the rental expense deduction and the abolition of stamp duty measures have reshaped the market. Property owners should now be prepared to pay rates in full, while tenants can continue to enjoy tax deduction benefits. The market's robust recovery demonstrates Hong Kong's resilience and the effectiveness of targeted policy interventions during times of crisis.
📚 Sources
The content of this article has been verified against official Hong Kong Government data and authoritative reference sources:
- Inland Revenue Department - Official tax rates, allowances, and tax ordinances
- Rating and Valuation Department - Property rates and valuation
- GovHK - Official portal of the Hong Kong SAR Government
- Legislative Council - Tax legislation and amendments
Last updated: December 2024 | The information in this article is for general reference only. Please consult a qualified tax professional for specific inquiries.
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