Morgan Stanley has released a research report indicating that the Hong Kong government's latest Budget announced an increase in stamp duty for residential properties valued over HKD 100 million, raising the rate to 6.5%. The bank estimates that such properties accounted for 0.3% of total transaction volume in 2025 but represented 8% of total transaction value. The measure is expected to negatively affect WHARF HOLDINGS (00004). Other companies with exposure to such properties include HANG LUNG PPT (00101) (e.g., Blue Pool Road houses), CK ASSET (01113) (e.g., the 21 Borrett Road project), HENDERSON LAND (00012) (e.g., The Summit in Mid-Levels West), and SHK PPT (00016).

Regarding commercial land, the absence of commercial land sales for the second consecutive year is expected to support the office and retail property markets by improving supply-demand dynamics. Various talent attraction schemes have brought 270,000 people to Hong Kong, with over 100,000 arriving through the Top Talent Pass Scheme, creating additional housing demand.

Additionally, the government is seeking to include real estate investment trusts (REITs) in the Stock Connect mechanism and has introduced amendment bills to facilitate REIT privatizations or restructurings, potentially exempting stamp duty for non-residential property transfers by REITs seeking listing. This is a positive factor for LINK REIT (00823).

Overall, the bank maintains a constructive outlook on property price recovery, forecasting a 10% increase in prices this year and expecting no further tightening measures within the year. However, local property stocks have already risen approximately 20% to 50% year-to-date, partially pricing in some upside potential. The upcoming earnings season may introduce volatility amid declining profit margins and a weak earnings outlook for 2026.