Select areas will resist slump
Hong Kong property prices have entered a down cycle, but flats located along railway lines on the island and those sought by end-users are expected to show the strongest resistance to falling prices, agents say.
Sales in the 50 major housing estates monitored by Ricacorp Properties dropped last week to their lowest level in more than seven years, with just 92 deals done in the week from November 28 to December 4. That was down 26 per cent down from the 125 deals recorded a week earlier, the lowest weekly sales recorded since June 2004.
'We believe the fall was because of poor market sentiment and the fact that demand has been absorbed by new residential projects released in the market recently,' said Patrick Chow Moon-kit, head of research at Ricacorp. 'Also, December is the traditional low season for the property market.'
With the Christmas and Lunar New Year holidays approaching, the firm's director, David Chan Tai-wai, said home sales would stay at current low levels for the next few months, unless the global economic outlook improves.
With sales volumes now at a seven-year low, prices were also likely to trend downwards in the coming months, said agents.
Louis Chan Wing-kit, managing director for residential sales at Centaline Property Agency, expects prices of mass residential flats to drop 15 per cent next year, with flats priced under HK$4 million likely to show the biggest falls.
'Small flats located in outlying districts without railway connections will suffer the most,' Chan said. 'Their prices could drop an additional 5 per cent above the declines experienced elsewhere.'
Luxury residential flats located at Kowloon station and on The Peak would be most resistant to the price correction.
'These properties will see price falls of 5 to 10 per cent only next year, while the others will drop 10 to 15 per cent,' Chan said, adding that flats in Island East that offer relatively high rental yields of around 5 per cent should also experience only a mild correction.
Alnwick Chan Chi-hing, head of valuation and professional services at Knight Frank in Hong Kong, echoed the view that flats in Island East would show a better performance.
Ap Lei Chau and Western district were also likely to show some resistance to the downward pressure on prices. These areas will benefit from construction of the South Island Line and West Island Line respectively.
However, prices of flats in Tseung Kwan O will face stronger price pressures due to the plentiful supply of new housing in that district.
'Downward pressure on prices in Tseung Kwan O will continue as a number of sites in the area are on track for sale in coming years,' said Chan, who expects prices in the area to end the year down 15 per cent - a sharper fall than across the board.
Flats in Yuen Long would also face stronger downward pressure as it is far from city centre.
Ricacorp's Chow said housing estates that had attracted more investor-buyers, such as Kingswood Villas in Tin Shui Wai, Taikoo Shing in Quarry Bay, and Amoy Gardens in Kowloon Bay, would see the biggest price falls.
'But prices in Kornhill in Quarry Bay, Telford Gardens in Kowloon Bay, and Luk Yeung San Chuen in Tsuen Wan, will show stronger resistance to the price correction as most of the buyers in these areas are end-users,' he said.
'End-users will be reluctant to sell their properties if offers don't meet their expectations.
'Investors, on the other hand, are willing to accept lower offers as they usually bought the flats at lower prices. This could lead to sharper falls in prices.'
In recent years, units in Kingswood Villas have been popular with investors, and up to half of all recent buyers in the estate have been by investors.
Fuelled by this demand, average prices in the estate were driven to a market peak of HK$3,360 per square foot in July. However, just five months on, and prices had fallen to HK$2,900 per sq ft last week.
Short-term property price decline recently forecast for Hong Kong by New World Development's Henry Cheng Kar-shun