Introduction
Hong Kong’s Financial Secretary has unveiled the FY2025-26 Budget outlining a series of economic forecasts and initiatives that aim to narrow the fiscal deficit and provide supportive measures to the real estate market. In this comprehensive analysis, every detail of the Budget is explored—from fiscal consolidation measures to initiatives tailored to boost both the residential and commercial property segments. This analysis delves deep into the implications for key real estate companies including Link REIT (823 HK), Sun Hung Kai Properties (SHKP), and Kerry Properties (683 HK), which are set to see potentially favourable outcomes from the government’s policy adjustments.
Economic Overview and Fiscal Measures
The Budget projects a GDP growth range between 2.0% and 3.0% for FY2025-26. Significantly, a fiscal deficit of approximately HKD67b is expected – equivalent to about 2.0% of GDP, a reversal from the fiscal surplus of HKD87b or 2.7% of GDP recorded in FY2024-25. The government’s strategic focus on fiscal consolidation is evident through its decisive steps including larger expenditure cuts, a civil service pay freeze, and the reduction of 10,000 civil service jobs.
Importantly, expenditure growth is addressed by implementing measures such as reducing operating costs and adjusting transport subsidy schemes. To support infrastructure spending, the government plans to issue HKD150-195b worth of government bonds. Forward-looking forecasts include the projection that the fiscal deficit will narrow further by FY2027-28, with a return to surplus expected by FY2028-29.
Targeted Measures for the Real Estate Market
The Budget introduces several initiatives aimed at stimulating the real estate market. Key measures include:
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Stamp Duty Adjustments: For residential transactions valued between HKD3m and HKD4m, stamp duties will be lowered from 1.5% to a fixed amount of HKD100. This could translate into maximum savings of up to HKD59,900 for home buyers. The targeted price range represents about 10% of secondary market listings and 15% of transaction volume, thus potentially stimulating demand for small unit-sized residential properties.
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Commercial and Residential Land Supply: Amid indications of a high office vacancy rate and weak demand for office space, the government has suspended commercial property land supply. Moreover, there is consideration to re-zone certain commercial sites into residential use and extend the timeline for commercial land in-situ exchange in areas such as Hung Shui Kiu and Ha Tsuen.
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Residential Site Development: The government is poised to launch eight residential sites offering a total of 13,700 units for sale in FY2025-26. This is coupled with a forecast of an annual completion of 17,000 private residential units from 2025 to 2029. Although these numbers align with market expectations, they represent an 8% decrease compared to the annual completions seen in FY2020-24.
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Infrastructure Investment for Northern Metropolis: An allocation of HKD3.7b has been announced to accelerate infrastructure investment for Phase 1 of the HK Park in Hetao Zone. Additionally, the tendering process for three pilot sites under the Large-scale Land Disposal Scheme is expected to commence in the second half of this year.
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Stock Connect for REITs: The government has confirmed that the implementation of REITs inclusion in the Stock Connect will be undertaken as soon as possible. Although no concrete timeline has been provided, market participants view this as a positive development for REIT investors, especially for Link REIT.
Deep Dive Company Analysis
Link REIT (823 HK)
Link REIT stands to benefit from the upcoming inclusion of Real Estate Investment Trusts in the Stock Connect scheme. The Financial Secretary’s statement on the matter, despite the lack of a concrete timeline, conveys positive sentiment for the company. Once implemented, this initiative could facilitate greater liquidity and international investor access, thereby potentially leading to a positive impact on Link REIT’s share performance.
As the Budget is characterized by a strategic push towards fiscal consolidation paired with initiatives to provide more dynamic investment opportunities, Link REIT is positioned to capitalize on these trends, benefiting indirectly from a more favourable market environment.
Sun Hung Kai Properties (SHKP)
SHKP’s involvement in primary residential projects such as Yoho West and Sierra Sea renders it sensitive to the recent lowering of stamp duties for transactions valued between HKD3m and HKD4m. These measures are designed to stimulate demand for small unit-sized residential properties—a segment in which SHKP has significant exposure.
Enhanced affordability through reduced stamp duties is expected to boost both end‑user and investor demand, leading to potential upticks in transaction volumes for SHKP’s residential projects. The supportive real estate measures encompassed in the Budget, aligned with the overall market optimism, reflect positively on SHKP’s medium-term growth prospects.
Kerry Properties (683 HK)
Kerry Properties’ flagship project, HAVA, is also likely to experience positive impacts from the revised stamp duty framework. The decision to lower stamp duties to a fixed HKD100 for residential transactions within the HKD3m to HKD4m range is anticipated to not only improve affordability but also drive increased transaction volumes.
With the supportive policies set to bolster both end‐user and investment demand in the residential market, Kerry Properties is well-placed to see benefits in its project pipeline. As such, the Budget provides a mildly supportive backdrop that is poised to enhance Kerry Properties’ market dynamics, reaffirming its growth potential in the real estate sector.
Conclusion
The FY2025-26 Budget from Hong Kong’s Financial Secretary is a balanced mix of fiscal consolidation measures and stimulative initiatives aimed at reinvigorating key segments of the market, particularly the real estate sector. With significant steps taken to reduce the fiscal deficit through expenditure cuts and strategic bond issuance for infrastructure spending, the government sets a clear path towards long-term fiscal stability.
At the same time, the Budget’s targeted measures—including the lowering of stamp duties and adjustments to land supply—are expected to drive demand in the residential market and create a more conducive environment for real estate developers and investors. Key players such as Link REIT, Sun Hung Kai Properties, and Kerry Properties are poised to benefit from these adjustments, reinforcing their medium-term growth prospects in a market that remains fundamentally aligned with evolving government policy.
