Housing prices tipped to stay stable

PUBLISHED : Friday, 20 July, 2012, 12:00am
UPDATED : Friday, 20 July, 2012, 12:00am


Home prices in Hong Kong will remain stable for the rest of the year, according to analysts, who believe the new government is unlikely to introduce measures that would dampen the market in the near future.

UBS Investment Research has revised its projection for the year to a 5 per cent year-on-year rise, from a drop of 5 per cent.

'We adjusted the forecast because home prices have surged 9 per cent this year, and we don't think they will drop significantly for the rest of the year,' said Eva Lee, head of Hong Kong and China property research for UBS.

'The risk was the highest in March and April, when the market was uncertain about what Leung Chun-ying would do and the economic situation in Europe,' Lee said.

In the Legislative Council on Monday, the chief executive unveiled his housing policies, which include spending HK$1 billion to help three non-government organisations build 3,000 hostel units for young people, as well as opening up the secondary market of the Home Ownership Scheme (HOS) for 5,000 applicants each year without requiring them to pay land premium.

Lee said this showed Leung was focused on subsidised housing, not suppressing home prices, which was one reason the bank adjusted its forecast. She said Leung had also played down his idea of assigning sites where new flats would only be sold to Hong Kong people.

Banks' willingness to provide mortgage loans and the further deleveraging of property owners - with 51 per cent of home owners free of mortgage obligations last year, compared with 42 per cent in 2001 - would prevent a substantial price correction, the bank said.

Thomas Lam Ho-man, head of research at property consultant Knight Frank, said prices would remain stable in the second half as Leung was not expected to introduce significant housing policies during the period.

'Prices of luxury properties will be flat in the second half, but prices of mass residential will be flat or drop up to 5 per cent,' he said.

Even if he does, Lam does not believe it would lead to a slump.

'The government will not seek to drag down property prices drastically. Housing supply is not expected to surge in the near future as it takes time to find suitable land, change land-use norms and complete development,' he added.

Lam said the new policy on buying second-hand HOS flats would bring new demand for private housing and boost residential prices, particularly for small flats. 'The details have yet to be announced. But we see the side- effects already,' he said.

Alnwick Chan Chi-hing, head of valuation and professional services at Knight Frank, said the government should simplify the procedure of approving building plans, which could speed up the housing supply.