Year-to-date, the Hang Seng Index has fallen constantly, indicating a gloomy investment outlook. The government announced earlier that the partial spicy measures related to the property market would be confiscated, however the market reaction was calm, and the property transaction did not increase significantly. Furthermore, the government stopped t
he sale of residential land during the first quarter of this year and the developers refused to pay the land premium for the residential land in the Northern Metropolis, which may eventually lead to the halt of this newly development area.
This year, the government's fiscal deficit has been deteriorating. The government is not able to deal with it and do not know when the deficit can be eliminated. Last year, the income from land sale was less than Hk $ one hundred forty billion, which was far from the initial estimate of eighty billion. The fiscal deficit in 2023 years is about one hundred billion, the shortfall of the income from land sale was as much as fifty percent of the fiscal deficit.
The government will announce a new yearly budget at the end of February, which could include that the spicy measures will completely be withdrawn. In addition, if the announcement provides additional measures such as the interest subsidies for the first-time property buyers, this will contribute to increasing the transaction volume of the property market.
At present, the government's fiscal deficit is serious, so it is imperative to eradicate it. If the government wants to use the asset appreciation tax to increase tax revenue, this may be counterproductive, as the market is already poor, and the additional tax will only further undermine public confidence in entering the market, resulting in a further reduction in transaction volume and property prices, and making land sale more difficult to return to normal volumes.
If the land sale is unable to recover to one hundred billion revenue per year, the issue of the government's fiscal deficit will not be resolved. With a huge and persistent deficit, the northern metropolis development project must depend on issuing hundreds billion of bond every year so that it can provide funding to first phase of development. Under this vicious circle of debts, Hong Kong will fall into the abyss of debts.
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