Hong Kong sales plunge as buyers adopt wait-and-see attitude

Property sales in Hong Kong dropped to their lowest levels in nearly a year in the last week of November due to cooling measures, the South China Morning Post has reported.

A Ricacorp survey on secondary market sales in major estates recorded only 173 property transactions between November 22 and 28, down 57 per cent from the 399 sales in the previous week and the lowest amount since February.

“The market temperature has dropped to freezing point,” David Chan Tai-wai, a director at real estate agency Ricacorp Properties, said.

Many property industry experts said they expected a wait-and-see attitude amongst buyers at least until the Lunar New Year, which will cause prices to fall between 5 and 10 per cent in the short term. But low interest rates and lack of new supply would probably buoy the market once buyers understood the measures, experts said.

“The government’s ‘spicy; measures – such as the special stamp duty to curb speculation – have not only driven speculators out of the market, but seriously dampened end-user sentiment as well,” Chan said.

No sales were recorded in six of the 50 housing estates that Ricacorp monitors in the week of November 22-28, and average selling prices fell 0.3 per cent from the week before. Sales also fell in the primary market with just 14 homes being bought last weekend as opposed to the 42 sold the weekend before, according to Samsung Securities.

The Hong Kong government announced on November 20 that it would apply an additional stamp duty of 5 to 15 per cent on residential units resold within two years. The Hong Kong Monetary Authority also lowere the maximum loan-to-valuation ratios on properties worth HK$8 million (US$1.03 million) or more.

Craig Shute, a senior managing director at property consultancy CB Richard Ellis, said that the low sales numbers were partly due to landlords waiting on the sidelines instead of rushing to sell at a large discount. “The low interest-rate environment ensures that the holding cost of a piece of property will be much lower than the special stamp duty, making landlords less willing to dispose of their assets at a deep discount and thereby making the market less liquid,” Shute said. Most potential buyers were also waiting on the sidelines in hope that new measures might cause prices to fall, Shute aded.

Nicholas Brooke, chairman of Professional Property Services Group, said he expected the market to remain cool until after the Lunar New Year when values would rise again with continued excess liquidity and low rates. “[It's] not a bad time to try to buy over the next few months in that there should be the opportunity to bargain and not be told that the price is non-negotiable,” Brooke said.