5 Key takeaways from Hong Kong Policy Address 2024

Chief executive John Lee has rolled out a raft of reforms in his third Policy Address on 16 Oct. 

The 100-page, 2.5-hour live broadcast of the Policy Address touched on a number of widely concerned issues in the local community, from improving living conditions and boosting the economy to admission of talents, the city’s status as a financial centre, and to promotion of civic education and social welfare, and so on. 

In this article, we will break down the five major policy highlights of the Policy Address for you.

Increase housing supply, relax mortgage terms

The Housing Authority will adjust the ratio of public rental housing to subsidised sale flats, aiming for a ratio of 6:4 instead of the current 7:3 in future public housing projects to be completed in the next decade.

Furthermore, in the next phase of the Green Form status and Home Ownership Scheme, applicants who have unsuccessfully applied for the same type of subsidised sale flats twice in a row will receive an additional ballot number to improve their chances of purchasing such flats.

All property cooling measures were scrapped at the Budget Speech this year, the HKMA issued guidelines on 16 Oct to relax mortgage conditions for residential and non-residential properties.

Regardless of property value, occupancy status, or whether the buyer is a first-time home buyer, the maximum loan-to-value ratio has been adjusted to 70%. This means that the previous cap of a 60% ratio for self-occupied residential properties valued at $35 million or more has been adjusted as well. The debt servicing ratio ceiling has also been adjusted to 50% for all cases.

According to the HKMA, the revision is a countercyclical macroprudential measure to restore the maximum loan-to-value ratios and the maximum loan-to-income ratios to the levels to implemented in 2009. 

The HKMA emphasises that prospective homebuyers should carefully assess the risks involved and act within their means when making a decision to buy a home, despite the changes in mortgage and housing policies.

Full MPF portability and lower fees on the horizon 

Another good news for employees is that the Mandatory Provident Fund Schemes Authority (MPFA) will explore a detailed plan for the "Full Portability" of MPF benefits.

The current system operates under what is commonly referred to as a semi-portability scheme, allowing employees to transfer their accumulated mandatory contributions in their MPF accounts to a scheme of their choice once a year.

The government believes that leveraging the eMPF Platform, launched in June this year, along with allowing employees to choose their own schemes, will encourage employees to actively manage their MPF investments and retirement planning. Additionally, this move could enhance market competition within the industry, creating room for fee reductions.

The cost of investment has a significant impact on an investor's success. While seemingly negligible, fee differences can have a magnified long-term effect due to the power of compounding, especially in retirement investments like the MPF.

Attract high-net-worth individuals and family offices

With 2,700 single-family offices in Hong Kong, the Policy Address cites industry projections that Hong Kong will become the world's largest cross-border wealth management centre by 2028. The Address emphasises the effort to promote the management of more global capital in Hong Kong, with the key measures including:

• Facilitate the opening of new distribution channels for private equity funds through HKEX’s listing
• Collaborate with large-scale sovereign wealth funds in regions such as the Middle East, in financing the setting up of funds to invest in assets in the mainland and other regions
• Enhance the New Capital Investment Entrant Scheme (CIES): Effective today, investment in residential properties is allowed provided that the transaction price of the residential property is no less than HK$50 million, with the amount of real estate investment to be counted towards the total capital investment capped at HK$10 million. From 1 Mar 2025, investments made through an eligible private company wholly owned by an applicant will be counted towards the applicant's eligible investment.
• Expand the scope of tax concessions: The government will consult the industry on the proposal to add qualifying transactions eligible for tax concessions for funds and single-family offices.

Explore: List of eligible CIES investment funds on the Endowus platform

More “landmark” IPOs, and an increase in capital raised

The government aims to enhance market efficiency and reduce transaction costs to promote the listing of international and large-scale mainland enterprises in Hong Kong for capital raising. This will strengthen the capital market through significant IPOs.

Another focus is reinforcing Hong Kong's position as the world's largest offshore Renminbi business hub, with the city continuing to contribute to the internationalisation of the Renminbi.

Major policies include developing the fixed income market infrastructure, such as establishing a central clearing system for RMB-denominated bond repurchase transactions and making RMB sovereign bonds issued in Hong Kong more popular as collateral in offshore markets.

More RMB-denominated investment products, achieved through:

• The HKEx aims to encourage more listed companies to have shares listed in the RMB stock trading counter and expand the scope of RMB equities.
• Efforts will be made to increase RMB bond issuance, including supporting more green and sustainable offshore RMB bonds in Hong Kong.
• The HKEx will seek support from the Ministry of Finance to boost RMB sovereign bond issuance and launch offshore RMB sovereign bond futures.
• Collaboration with mainland authorities will be pursued to expand Bond Connect (Southbound Trading), including widening eligibility for non-bank financial institutions. Liquidity management tools will be enhanced to facilitate offshore investors' investment in onshore bonds through various bond repo and collateral arrangements using onshore RMB bonds.

Support SME, promoting a diversified economy

To support the liquidity of SMEs, the principal moratorium will be relaunched, which allows borrowing enterprises under the SME Financing Guarantee Scheme to apply for principal moratorium for up to 12 months. 

The maximum loan guarantee periods of the 80% and 90% guarantee products will be extended to ten years and eight years respectively, while the partial principal repayment options will be offered to new loans under the two guarantee products. 

The HKMA is also actively considering to provide flexibility in banks’ capital requirement to facilitate their lending to SMEs

Read more: For SMEs and start-ups: Higher yield for your corporate cash

Planning for your own financial future

The Hong Kong Policy Address 2024 encompasses a wide range of critical areas, including housing, the economy, talent admission, and the status of the financial centre. It serves as a testament to the determination of the government to fortify Hong Kong's position as a global financial centre and a thriving hub for asset management.

Amid this dynamic landscape, the government has taken decisive steps to relax home ownership restrictions and introduce a host of favourable policies aimed at fostering the growth of new industries. 

Whether you find yourself on the cusp of embarking on a new chapter as a potential homeowner or an ambitious entrepreneur, the strategic implementation of financial planning becomes paramount. A great plan always leads to a pathway to mitigate risks and towards a more prosperous financial future.

At Endowus, we stand ready to accompany you on this exciting journey. Our team of seasoned and licensed client advisors possesses a wealth of experience, enabling them to provide you with bespoke and professional financial advice tailored to your unique circumstances. 

Should you have any queries or seek further guidance, we invite you to arrange a one-on-one consultation with our team of licensed client advisors. Embark on your investment journey with Endowus today.

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