Weekly Buzz: Highlights from Hong Kong's Budget 2024

Hong Kong’s budget plan for 24/25FY is out. With its peach-coloured cover – meant to reflect hope – Paul Chan, Hong Kong’s Finance Chief is emphasising a positive outlook for Hong Kong’s economy.

With the “Night Vibes” campaign last year doing little to bring back vibrancy to the city,  a deficit of $101.6B HKD , and an anticipated reduction of $48B HKD in reserves, the budget plan has its work cut out. But with land and housing initiatives, to tax reforms and public finance – there's something for everyone in the latest budget. Here are a few highlights:

Relaxing curbs on the property market

The government’s previous property cooling measures – which were in effect for the last 14 years – will now be lifted (effective immediately!). These include the Buyer's Stamp Duty (BSD) for non-permanent residents and the New Residential Stamp Duty (NRSD) for second-time purchasers.

Homeowners will also no longer be required to pay the Special Stamp Duty (SSD) if they sell their property within a two-year period. The government believes these measures are no longer necessary, given current economic and market conditions. This decision reflects a reevaluation of the property market, and aims to adapt to the changing needs of homeowners and potential buyers.

Extra cuts for all  demand-side property management measures means extra cash – more so if you maximise it. If buying a home is your long-term goal, consider investing that extra cash in a well-diversified portfolio (our General Investing portfolios come to mind here). This lets your money work harder for you. 

Tax handouts (Sorry high earners…)

In the new budget, the governement also unveiled plans to increase taxes on high earners, in an effort to address the city's deficit. Exemptions for salary tax and profit tax have been halved compared to the previous year. The exemptions for salary tax and profit tax will continue to be fully reduced but the limit will be decreased from $6,000 HKD to $3,000 HKD.

A two-tier tax system will be implemented, starting from April, with income up to $5M HKD taxed at 15 percent, with income exceeding that threshold taxed at 16 percent. This change affects approximately 12,000 taxpayers and is projected to generate an annual revenue of around $910M HKD for the government. 

Silver Bonds lead a new $70B HKD retail bond issuance

The government’s also injecting new funds into the economy, issuing new retail bonds worth $70B HKD. This issuance is split into  $50B HKD for the Silver Bond Series and $20B HKD for green bonds. These funds are set to be used for long-term development projects, with a borrowing ceiling of $500B HKD in total.

Over the next five years, the government plans to issue bonds ranging from $95B HKD to $135B HKD annually,  to support the development of the Northern Metropolis, alongside other infrastructure endeavors. 

With fiscal discipline in mind, the government aims to maintain a prudent level of debt, with the government debt-to-GDP ratio expected to stay around 9 to 13 percent from 2024/25 to 2028/29, lower than most advanced economies.

If you’re looking to invest in bonds, our USD Cash Yield Portfolio might be right for you. There’s no need to wait for your “Silver Age” – start investing with no minimums and no maximums, to secure yourself an additional stream of income.

🎓 Simply Finance: Silver Bond

A Silver Bond is a type of government bond issued by the Hong Kong government, catered to residents aged 65 or above. The program was introduced in 2016 as part of the government's efforts to provide investment opportunities for elderly investors, and to promote financial inclusion. These bonds allow elderly investors to invest in a government-backed instrument, giving them a stable source of regular income.