Page last updated at 09:47 GMT, Wednesday, 24 February 2010

Hong Kong's economy 'to grow 5%' in 2010

Apartments and houses in Hong Kong
Property prices have surged over the past year

Hong Kong's economy will grow by between 4% and 5% this year, Financial Secretary John Tsang has said in his annual budget speech.

Gross domestic product (GDP) shrank by 2.7% in 2009, far less than the 3.3% contraction the territory's government had last predicted in November.

Hong Kong's economy, which relies on the financial sector and exports, was battered by the global economic crisis.

It emerged from recession in the second quarter of last year.

The economy grew by 2.3% quarter-on-quarter in the final three months of 2009, Mr Tsang said.

But he warned that major risks remained, including the possibility of a property bubble, as prices have risen sharply over the last year.

Luxury homes tax

Mr Tsang also announced that taxes on the most expensive homes would be raised for the first time since 1999.

Stamp duty on luxury homes - those costing more than $20m Hong Kong dollars ($2.57m; £1.67m) - will rise to 4.25%, from the current 3.75%.

A 29% surge in house prices - pumped up by buyers from mainland China - has raised fears that prices are rising too fast.

"While the local property market is still reasonably healthy, we must not lose sight of the increasing risk of a property bubble developing with the global economic recovery," Mr Tsang said.

However, the unexpected income from the increased home sales has boosted Hong Kong's public finances during the past financial year.



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