The International Monetary Fund (IMF) is suggesting that special stamp duties imposed on property purchase be phased out, once systemic risk arising from speculative demand dissipates.

In its latest report assessing the health of the SAR economy, the global body said the duties that can be removed by phases are the Buyer's Stamp Duty and New Residential Stamp Duty which under the IMF's view are part of capital flow management and macro prudential measures.

The Buyer's Stamp Duty applies to non-permanent residents, and New Residential Stamp Duty applies to those who own more than one home.

The IMF said the government should "stand ready" to adjust the stamp duties after carefully monitored speculative demand by both residents and non-residents.

It also said any relaxation of loan-to-value (LTV) and debt service-to-income (DSTI) requirements should be commensurate with the extent that housing-related downside risks, such as property price declines and rising interest rates, have materialised.

On the territory's housing supply, the IMF said increasing supply is critical to resolving the structural supply-demand imbalance. It welcomed the administration’s more coordinated approach to boost housing and residential land supply by identifying more land and streamlining statutory and administrative procedures.

The IMF also said pandemic-era measures to support vulnerable households and affected SMEs could be unwound gradually. It said as economic activity normalises in the post-pandemic period, exceptional financial support should be phased out. And financial relief measures such as the moratorium on principal payments and full credit guarantee schemes should be unwound as they expire.

On public finance, the global body said a gradual pace of fiscal consolidation to return to a balanced budget in the medium term, rather than in about two years as the government suggested, would help ensure a solid and balanced recovery. It said a comprehensive tax reform over the medium term to broaden the tax base is imperative to provide a stable source of revenue to meet long-term spending needs while ensuring fiscal sustainability.

Financial Secretary Paul Chan says he welcomed the "highly positive" assessment by the IMF of the economy, saying it fully recognises the government's capability, determination and accomplishment in maintaining financial stability and economic growth.

"It also clearly shows that under our new policy vision of integrating a 'capable government' and a 'highly efficient market', we are leaping forward steadily and bolstering prosperity," Chan said.

On the Linked Exchange Rate System, the IMF said the peg remains the appropriate arrangement for the SAR as an anchor for macroeconomic and financial stability.

Chief Executive of the Hong Kong Monetary Authority, Eddie Yue, said the system is an anchor to the economic and financial stability in Hong Kong, and its credibility continues to be supported by the mechanism's transparency, Hong Kong's ample foreign reserves, prudent fiscal policy frameworks, robust financial regulation and supervision, and the economy's flexibility.
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Last updated: 2023-05-05 HKT 15:24