UBS expects a high likelihood of the Hong Kong government reintroducing the Home Ownership Scheme, which may have a slight negative impact on local developers

UBS published a research report indicating that the new fiscal budget will be announced on Wednesday (25th), and the market is concerned about whether it will introduce a reduction in the stamp duty for residential properties from HKD 4 million to HKD 6 million, explore the possibility of allowing the use of Mandatory Provident Fund for property purchases or rentals, and reintroduce the public housing purchase scheme. Considering that Hong Kong has seen a strong recovery since the beginning of the year, UBS expects the government will not introduce additional broad stimulus measures, but relatively speaking, believes the likelihood of reintroducing the purchase scheme is higher, as this move can help the government recover funds to improve its financial situation and also help address the issue of wealthy public housing tenants.

UBS stated that reintroducing the purchase scheme will have limited direct negative impact on the private residential market, but if competition for subsidized housing sales decreases, or if the authorities further relax the income limits for white form applicants, it may erode the demand for private residential properties priced between HKD 3 million and HKD 5 million. The bank believes the policy will have a slight negative impact on local developers, especially those involved in more entry-level developments. Additionally, it expects the policy to be positive for Link REIT (00823.HK), anticipating it will support retail consumption in Link REIT's shopping malls.

Since 2005, the Hong Kong government has not allocated more eligible public housing estates to the purchase scheme. Currently, there are 39 public housing estates in Hong Kong with approximately 32,000 unsold units. The bank expects that if the scheme is reintroduced, the authorities will focus on newer public housing estates, believing that over 40,000 wealthy public housing households and more than 7,700 households currently undergoing income and asset declaration investigations will become the core participant group