Prices are okay for now, say property analysts

PUBLISHED : Saturday, 27 February, 2010, 12:00am
UPDATED : Saturday, 27 February, 2010, 12:00am

The government's move to make more sites available for flats is unlikely to cause a property glut and push prices down, according to property analysts.

'We think the market is quite capable of taking up this supply,' JP Morgan analyst Raymond Ngai said in his latest research report.

Taking into account the announced land auctions, tenders by MTR Corp and the Urban Renewal Authority plus potential land conversions will supply 13,800 units to the market this year, according to JP Morgan. 'If half of the selected land sites are put up for auction, total supply for the year will be around 15,000 units, equal to the expected total sales in 2010,' Ngai said.

He said total supply would have to reach 25,000 units this year before residential stock returned to 2008 levels.

'Hence we do not think over-supply is happening now,' he said.

On Thursday, the government announced it would add 11 sites to the land sale application list. Six urban sites which could produce 2,200 units will be put out for regular auction or tender, if these are not triggered on the application list.

Midland Realty chief analyst Buggle Lau Ka-fai predicted that annual flat supply in Hong Kong over the next five years would average 11,000 units a year. This compared with more than 30,000 units a year when the market slumped in 1998.

Benedict Ma, associate director in the research department of CB Richard Ellis, said government measures to increase residential land supply would help ease concerns that a drop in new residential completions over the past several years had contributed to a lack of affordable housing.

However, with a typical development period of at least two to three years from the date of the land sale to completion, residential property prices in Hong Kong were likely to remain high for the medium term. The rebound in residential capital values over the last year was fuelled largely by historically low interest rates and a surge in liquidity in the banking system - two factors over which the Hong Kong government had little control, he said.

Commenting on the increase in stamp duty from 3.75 per cent to 4.25 per cent on the sale of luxury properties valued at more than HK$20 million, Ma said investors would have to deal with at least an additional HK$100,000 in transaction costs once the rise in stamp duty was implemented.

'While this is not an insignificant sum, we feel that such investors have the financial strength to digest such an additional cost,' he said.

Property glut is way off

JP Morgan says the total supply of units will only top 15,000 this year

Experts say high-end investors will not be put off by stamp duty rise to: 4.25%