Storm over home prices triggers plunge in sales

PUBLISHED : Saturday, 07 November, 2009, 12:00am
UPDATED : Saturday, 07 November, 2009, 12:00am

Luxury and mass market home sales in Hong Kong have plunged over the past two weeks, as buyers wait for government measures that are expected to push prices lower.

Market sentiment had soured as fears of a property price bubble prompted banks to tighten lending on luxury housing and the government warned that it was monitoring the city's home market more closely, agents said.

'No official figures have been published yet, but luxury sales volumes recorded at our branches show a decline of 40 per cent in the past two weeks, compared with the previous period,' said Patrick Chow Moon-kit, the head of research at property agency Ricacorp Properties.

The mass housing market was feeling less pain with sales declining about 20 per cent, he said.

According to data compiled by Ricacorp, 2,034 potential buyers have reserved bookings at its branches to view second-hand flats at 50 housing estates this weekend.

That represents a 10 per cent decline from last week.

'Tighter lending for luxury home purchases has not had any substantial impact on buyers, as most of them are financially strong,' Chow said. 'However, market sentiment has changed since the surge in high-end home prices became a controversy.'

The Hong Kong Monetary Authority last month asked banks to reduce the amount they lend to buyers of luxury homes from 70 per cent to 60 per cent of the value of homes priced at HK$20 million or more.

That was followed by Financial Secretary John Tsang Chun-wah's statement to developers that the government would not rule out intervening in the property market if it became unfair to buyers.

Mainlanders, who are estimated to account for 20 per cent to 30 per cent of the buyers in the luxury housing sector, are among those who have become more cautious.

'They are not buying as they are betting prices will fall,' said Louis Chan Wing-kit, an executive director at Centaline Property Agency.

Midland Realty chief analyst Buggle Lau Ka-fai said the decline in both luxury and mass housing transactions followed the sharp rises in prices earlier this year.

Midland said mass housing prices were 27 per cent higher than at the end of last year.

Luxury home prices were estimated by property consultants to have risen 40 per cent so far this year.

Total sales in Hong Kong fell 23 per cent to 11,112 deals last month from September's 14,437, the first month-on-month decline in seven months, according to the Land Registry.

Among them, sales of luxury home valued at HK$20 million or above fell 42.38 per cent to 87 deals, against 151 lodged with the government in September, according to Lau.

Last month's figure, however, better reflected market activity in September because of the four-week time lag between transactions and registrations.

Sales of properties this month, to be announced next month, would fall further, he said.

Agents said developers would slow their sales schedules amid the weakening sentiment, potentially pushing down the number of new home sales.

Agents had expected Sino Land to launch its luxury project, the Hermitage, in Tai Kok Tsui this month, but the developer on Thursday said no timetable had been finalised.