Negative market sentiment pushes home-buyers to sidelines
Buying confidence has plunged to a new low with home prices in the second-hand market tumbling to their 1992 levels.
According to estate agents confidence is at its worst since the financial crisis three years ago.
Hit by negative market sentiment, potential home-buyers are staying on the sidelines, further depressing activity and prices, the agents said.
Despite developers offering a fresh round of price cuts and additional sweeteners to drum up buying interest, the sales response remained tepid.
In the second-hand market home-owners have lowered their asking prices at major housing estates by up to 5 per cent.
Ricacorp Properties on Monday said a 1,061-square foot unit in Taikoo Shing changed hands for HK$3.5 million, or HK$3,298 per sq ft. The transacted price was 5 per cent below the market level.
Fortune Realty managing director James Tin Kwok-keung said home prices at major housing estates in Kowloon and the New Territories were at 1992 levels.
He attributed the poor market sentiment mainly to the lack of buying confidence, hurt by a series of negative reports.
The market had been plagued by events on the volatile stock market and two major developments - Oscar by the Sea, in Tseung Kwan O, and Pokfulam's The Belcher's - recorded slow buyer interest.
Home prices further weakened after a forecast 10 per cent fall in prices made by analysts UBS Warburg and Salomon Smith Barney late last month. This came amid the Government's confused signals on its housing policy.
'I haven't seen the market so quiet since 1997,' Mr Tin said.
He forecast home prices could drop by another 5 per cent in the short term and expected the low prices to attract bargain-hunters back into the market.
But he believed it was only a temporary phenomenon, reflecting the loss of confidence.
Centaline Property Agency managing director Shih Wing-ching said the company's average daily transactions in the first week of this month had tumbled by more than half to 17 deals.
In the first three quarters, he said the company closed an average daily transaction total of 38 deals.
Mr Shih blamed the sluggish market on the large supply of properties, saying there would be 30,000 new residential units released next year, against the take-up rate of 18,000 this year.
Developers were unlikely to increase prices for their new projects in view of the large supply overhang, he said.
Midland Realty executive director Victor Cheung said its level of transactions had also declined 20 per cent last week from a year ago, due to most potential home-buyers remaining cautious.
He said units worth above HK$5 million could be hit hardest due to the large lump-sum down-payment involved.
Ricacorp Properties managing director Barry Law Lam-wei believed home prices would have an adjustment of between 5 per cent and 8 per cent this year.
'But it should be a healthy correction,' he said.
Buying confidence had been partly hit by the Government's latest annual target to build 91,000 units, coming just three months after it scrapped its 85,000-unit annual target.
The increasing loss of confidence was also due to the Housing Authority revealing plans to build Housing Ownership Scheme luxury units in prime locations, including Ho Man Tin. They would compete with the private housing sector, Mr Law said.