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Hong Kong to Relax Housing Rules, Cut Liquor Tax in Growth Push
(Bloomberg) — Hong Kong will loosen mortgage rules and cut an alcohol tax in a series of measures seeking to support the flagging real estate sector and boost spending, as China’s slowdown weighs on the city’s economy.
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Chief Executive John Lee said he will raise the amount of loans homebuyers are allowed to borrow for some properties and broaden a residency-by-investment program. The city’s leader also announced a drastic cut to a tax on liquor, looking to boost a services sector struggling with fewer tourists and weak sentiment.
“We must maintain our development momentum and self-renewal, and that we must embrace changes while staying principled, innovative and flexible in meeting challenges and opportunities,” Lee said in his annual policy address Wednesday.
The Hang Seng Properties Index rose as much as 3.9% after Lee announced the relaxed mortgage rules, outperforming the main Hang Seng Index. Shares of New World Development surged as much as 6.5% before paring gains.
Lee set his sights on boosting the economy after cementing Beijing’s authority over the former British colony with a national security law earlier this year, a move Western governments criticized for muzzling open discussion in the Asian finance hub.
The city’s economy has grown in the first six months within the official forecast range of 2.5% to 3.5% thanks to strong exports that offset sluggish consumption, although China’s slowdown and geopolitical uncertainties have cast a cloud on Hong Kong’s growth outlook.
A focus of Lee’s speech was the ailing property sector, with home prices hovering near a 2016 low.
The maximum loan-to-value ratio for all homes will be set at 70%, he said, allowing some homebuyers to fork out lower downpayment. The ratio is presently capped below that threshold for homes above HK$30 million ($3.86 million) and 60% for those valued above HK$35 million.
A broadened investment migration program will include homes valued at HK$50 million or above as part of the required HK$30 million investment. Previously excluded, such property purchases would fulfill a third of that requirement.
Thomas Chak, head of capital markets and investment services at Colliers International, said the new home investment policy will help attract wealthy individuals to the city and boost transaction volume in luxury properties, but will have limited impact on the general residential market.
The recent stimulus bonanza by Beijing, alongside the US Federal Reserve’s interest-rate cuts, may provide some relief. Borrowing costs in the city rise and fall with the Fed’s decisions as the local currency is pegged to the dollar.
Hong Kong will also lower the amount of tax it levies on spirits to help the services and food industry, Lee said, confirming a previous Bloomberg report. The duty for liquor with an import price above HK$200 will be lowered to 10% from 100%, with the lower rate applicable to the excess amount.
These sectors have struggled as sales and tourist arrivals remain below levels before the pandemic, with a wave of bankruptcies points to eroding business finances. That period saw the city’s image take a hit from draconian quarantine measures and a crackdown on the pro-democracy political opposition, including former media mogul Jimmy Lai, whose national security trial resumes next month.
Lee’s housing measures add to his administration efforts over the past year to boost the real estate market, including by removing most home purchase curbs and cutting property buying taxes. Prices picked up slightly earlier this year before continuing a decline.
The expanded migration plan, called the New Capital Investment Entrant Scheme, was relaunched last year as the semi-autonomous Chinese city sought to attract talent and capital in the face of fierce competition from peers including Singapore.
The initiative includes a mandatory HK$3 million investment into a portfolio run by the Hong Kong Investment Corp. to support local innovation. The plan was expected to bring in HK$120 billion and 4,000 migrants annually, the government said in December.
–With assistance from Shawna Kwan and Sangmi Cha.
(Updates with market reaction, comments and more details)
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Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
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The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
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