Citigroup: Fringe Equity Tax Reform Expected to Catalyze Hong Kong Office and Residential Demand Swire Properties (01972) and Sun Hung Kai Properties (00016) Will Benefit

The Zhitong Finance App learned that Citi published a research report saying that the Hong Kong Government gazetted and submitted the 2026 Tax (Amendment) Bill (on Funds, Family Investment Control Tools and Ancillary Benefits) Bill in June this year, which proposes to optimize tax relief measures by expanding fund definitions, removing the 5% threshold for ancillary transactions, and providing tax relief for ancillary benefits to attract private equity funds and family offices to settle in Hong Kong and promote the inflow of capital and talent. Citi maintained a “neutral” rating for the Hong Kong real estate sector. The preferred stocks for the second half of the year were Swire Properties (01972), Lingzhan Real Estate Fund (00823), and Sun Hung Kai Properties (00016).

Citi believes that the reform will be a structural catalyst for attracting capital and talent to Hong Kong, supporting office and residential demand. It is expected that demand for office buildings will increase by at least 5% and increase the number of new entrants by about 2%. At the same time, existing Hong Kong asset management managers may use tax savings to buy homes, which will enhance Hong Kong's international status in the long run, support economic and asset valuation growth, and believe in land and Swire Properties.

The bank estimates that if 3% of fund managers from Singapore and mainland China choose to migrate to Hong Kong and benefit from tax incentives, it will bring in about 1,500 asset management professionals. If the inflow of talent is realized within a year, it will be equivalent to an increase in annual housing demand by about 2%; while the tax savings of existing Hong Kong asset management managers can be used to buy a home, it may bring about an additional 4% upward space in annual transaction amounts, and the high-end and luxury housing markets will benefit even more.