Imagine buying a HK$10 million Hong Kong apartment and saving HK$1.5 million overnight. That’s exactly what happened on February 28, 2024, when Hong Kong eliminated all property cooling measures in the most dramatic stamp duty reform in over a decade. This comprehensive analysis explores how Hong Kong’s stamp duty evolution is reshaping the property market, who’s benefiting most, and what the future holds for investors, homebuyers, and the broader real estate landscape.

The Great Policy Reversal: From Cooling to Stimulation

Hong Kong’s property market has undergone a complete transformation in its stamp duty approach. After years of implementing “spicy measures” to cool an overheated market, the government executed a 180-degree turn in February 2024, recognizing that the previous policies had become counterproductive in a market facing declining transaction volumes and falling prices.

February 28, 2024: The Day Everything Changed

Financial Secretary Paul Chan Mo-po’s 2024/25 Budget announcement marked a watershed moment for Hong Kong’s property market. With immediate effect, the government abolished all demand-side management measures that had been in place for nearly a decade:

• Buyer’s Stamp Duty (BSD): Previously charged at 15% on residential property acquisitions by non-Hong Kong permanent residents
• New Residential Stamp Duty (NRSD): A 15% levy on purchases by Hong Kong permanent residents who already owned residential property
• Special Stamp Duty (SSD): Ranging from 10% to 20% on properties resold within two years of acquisition

The Rationale Behind the Reversal

The dramatic policy shift wasn’t arbitrary. In 2023, Hong Kong’s property market faced significant challenges:

• Residential flat prices fell by 7%
• Transaction volumes declined by 5% to approximately 43,000 deals
• Rising interest rates and external economic uncertainties created cautious market sentiment
• The cooling measures were suppressing market liquidity at a time when stimulation was needed

Current Stamp Duty Framework: Universal Scale 2 Application

Since February 28, 2024, Hong Kong has operated under a simplified, unified stamp duty regime. All property buyers—whether Hong Kong permanent residents, non-residents, companies, or individuals—now pay Ad Valorem Stamp Duty (AVD) at Scale 2 rates. This eliminates the previous dual-rate system that discriminated based on residency status and property ownership.

Key Distinctions Eliminated

The reform has abolished several discriminatory features of the previous system:

• Residency status: No distinction between Hong Kong permanent residents and non-residents
• Property ownership: First-time and subsequent purchases treated identically
• Property type: Residential and non-residential properties subject to the same rate structure
• Buyer entity: Individuals and corporate buyers pay the same rates

Market Response: Transaction Volumes and Price Dynamics

2024 Transaction Volume Surge

The removal of cooling measures produced an immediate and substantial impact on transaction volumes. According to market data, the response exceeded initial expectations:

The differential performance between primary and secondary markets reveals important dynamics. New home sales benefited disproportionately from the reforms, as developers aggressively marketed inventory to capitalize on renewed buyer interest. The secondary market, while growing in volume, saw essentially flat transaction values, suggesting that prices remained under pressure despite increased activity.

The Mainland Chinese Buyer Phenomenon

One of the most significant market shifts has been the surge in purchases by mainland Chinese buyers, enabled by the removal of the 15% Buyer’s Stamp Duty. This demographic now accounts for approximately 24% of all Hong Kong property transactions—nearly triple the historical peak of 9% recorded in 2010.

This influx has been driven by multiple factors:

• Elimination of the punitive 15% BSD that previously deterred non-permanent residents
• Relative value proposition compared to tier-one mainland cities like Shenzhen and Guangzhou
• Hong Kong’s stable legal system and property rights framework
• Looser mortgage lending standards following HKMA adjustments
• Introduction of various talent admission schemes that facilitate permanent residency pathways

Price Trajectory: Modest Recovery Amid Structural Headwinds

While transaction volumes have rebounded strongly, price appreciation has been more muted. Industry forecasts for 2025 project residential price increases of approximately 3%—a modest gain that reflects ongoing structural challenges in the market.

Key factors constraining price growth include:

• Supply overhang: Approximately 108,000 private homes are forecast to enter the market over the next 3-4 years
• 2025-2026 completions: Over 20,000 new residential units expected
• Developer pricing pressure: Major developers have implemented price reductions and incentives for units below HK$5 million
• Interest rate environment: Elevated borrowing costs continue to constrain affordability
• Economic uncertainty: Cautious sentiment regarding Hong Kong’s economic growth trajectory

Supporting Measures: HKMA Mortgage Adjustments

The stamp duty reforms did not occur in isolation. Concurrent with the February 28, 2024 policy announcement, the Hong Kong Monetary Authority (HKMA) implemented significant relaxations to countercyclical macroprudential measures for property mortgage loans:

These adjustments substantially improved borrowing capacity for property purchasers, particularly when combined with the elimination of stamp duty cooling measures. The coordinated policy approach demonstrates the government’s comprehensive strategy to revitalize the property market.

Expert Analysis: Future Policy Direction

Stability and Consolidation: The Consensus View

Based on analysis from leading international advisory firms, the expert consensus suggests that Hong Kong’s stamp duty framework has reached a new equilibrium that is likely to persist for the medium term. Several factors support this assessment:

• Policy objectives achieved: Transaction volumes have recovered substantially, suggesting the stimulus measures have been effective
• Balanced market conditions: The combination of increased supply and moderate demand growth reduces pressure for further intervention
• Fiscal considerations: The government’s deficit position may constrain appetite for additional duty reductions
• Regional competitiveness: Current rates are broadly competitive with other major Asian financial centers

Potential Scenarios for Further Reform

While major policy changes appear unlikely in the near term, several scenarios could trigger additional adjustments:

1. Continued Market Weakness: If transaction volumes decline or prices fall significantly despite current measures, the government could consider further raising the HK$100 duty threshold or introducing temporary stamp duty rebates
2. Overheating Concerns: In the unlikely event of rapid price appreciation driven by speculative activity, potential responses could include selective reintroduction of SSD for properties resold within 12-24 months
3. Legal and Structural Reforms: Based on Court of Final Appeal remarks, potential legislative amendments could address expansion of group relief provisions to encompass modern corporate structures

Implications for Different Stakeholders

Market Forecast: 2025 and Beyond

Leading property consultancies have issued forecasts for Hong Kong’s property market in 2025, with stamp duty stability assumed as a baseline:

• Transaction Volumes: Expected to maintain or slightly exceed 2024 levels of approximately 67,000-70,000 deals
• Price Trajectory: Consensus forecast of 3% price appreciation, though some analysts project continued modest declines of 0-5%
• Primary Sales: Developers face pressure to move inventory, likely maintaining elevated launch activity
• Mainland Buyers: Expected to remain a significant market force, potentially increasing to 25-30% of transactions
• Supply Pressure: Continued high completion volumes will constrain price growth through mid-decade

Hong Kong’s stamp duty framework has undergone a fundamental transformation from market intervention to market facilitation. The comprehensive dismantling of cooling measures represents a pragmatic acknowledgment that previous policies, while effective in moderating price growth during boom years, had become counterproductive in a downturn. For market participants, the current environment offers exceptional clarity and flexibility, with the elimination of residency-based discrimination and reduction of transaction costs creating an enabling framework for property investment and homeownership. While broader economic factors will ultimately drive price trajectories, Hong Kong’s stamp duty regime has positioned the jurisdiction competitively for the years ahead.