New housing measures unlikely to stop prices rising, analysts say

PUBLISHED : Saturday, 20 November, 2010, 12:00am
UPDATED : Saturday, 20 November, 2010, 12:00am

The government's new measures may keep speculators out of the property market, but at least one industry veteran thinks the steps are unlikely to keep prices from rising,

'The new cooling measures will be very effective in keeping speculators from the property market,' said Shih Wing-ching, the founder of Centaline Property.

But Shih said the main driver of soaring property prices was recent American monetary policy. 'The growth did not come from the local market, but the global economy. With the influx of hot money, I don't think our small government can do anything,'

One property agent, however, said the government's newest moves against property speculation showed some quick effects.

'It is the first time I saw the sales office of Cheung Kong's Festival City II so quiet on the first day of a launch. There are more property agents than potential buyers,' the agent said.

'The sales were poorer than our previous expectations. About 40 per cent of our clients were holding their buying plans until after the government released the new measures. They need more time to consider and monitor the price trend,' the agent said.

Demand from mainland buyers remained strong, said Louis Ng, a director at Ricacorp Properties.

'The measures will not affect their property investment in Hong Kong,' Ng said. 'Most of them could only get mortgages of 50 per cent from the banks previously. They are not looking for short-term investments.'

Mr Chow, a mainland industrialist, yesterday bought a flat at Festival City for more than HK$8 million as a long-term investment. 'I'm not worried the market will be affected by the measures. I may buy other flats due to the Hong Kong currency depreciation and appreciation in the yuan.'

Cusson Leung, an analyst at Credit Suisse, said that he expected prices would drop by 1 to 2 per cent, while the transaction volume would exhibit a more significant drop in four to eight weeks.

He expects most banks might still encourage lending in other forms, such as 'renovation loans' with long payment terms. People with insufficient down payments might opt for these loans. And developers might offer second mortgages to primary property buyers. But Trevor Cheung, an analyst at BNP Paribas, holds a different view.

'Property prices will drop 10 to 15 per cent in the coming two months,' he said. 'The government is brave enough to enact these strong measures, finally. I didn't expect the government to do it.'

He believes investors and end users who planned to upgrade their flats would be affected.

'End users will hesitate to buy property, as they may need to pay an extra stamp duty of 10 per cent,' he said.

Shih, of Centaline Properties, also said end users would suffer from the measures. They need to save more money for paying the down payment, as the Hong Kong Monetary Authority lowered the loan-to-value ratio.