REVIVAL under way
After months in the deep freeze, the housing market is showing signs of thawing, as buyers return from the sidelines.
In February, monthly home sales in the primary and secondary markets rebounded 10 per cent over the previous month, figures from the Land Registry show. But February home sales were still 63 per cent lower than the corresponding month a year earlier.
'All the bad news that has come out is getting absorbed, be it the local property cooling measures or the euro-zone debt crisis,' says Patrick Chow Moon-kit, head of research at Ricacorp Properties.
'Buyers, especially first-time buyers, have realised that housing policies will remain unchanged in the near future. Despite all the fears, life has to go on. When you have a genuine need to buy your first home or move up the housing ladder because of a bigger family, you can't wait for too long.'
Midland Realty's chief analyst, Buggle Lau, believes demand from first-time buyers is a key factor in the growth in activity.
'Having waited for months, some first-time buyers are acquiescing to the reality in pricing and are getting off the sidelines,' he says. He believes the pent-up demand from newly-weds has been suppressed for months.
'Last year, the total number of marriages was up 10.1 per cent over 2010 to reach a record 579,000. That compares with 376,000 registrations in 1997, when the property market was at its peak,' he says. 'And don't forget about the Year of the Dragon effect. More babies will be born this year, even if you don't take into account those born to mainland mothers.'
With more buyer-occupiers returning to the market, a larger number of new properties were launched for sale last month and early March. These include The Chantilly, in East Mid-Levels; and Chatham Gate, in Hunghom; Festival City (Phase 3) in Tai Wai, Sha Tin; Lexington Hill in Kennedy Town; Park Island (Phase 6) in Ma Wan; and two villa developments, La Verte and The Green, in Fanling.
'It is evident that first-time buyers have contributed to an increase in demand for smaller new homes,' says David Cheung, an executive director at property consulting firm Vigers.
Cheung says more flexible pricing strategies by developers have helped stimulate demand.
'Developers are less aggressive in pricing their new projects,' he says. 'Some are set at prices close to the secondary market prices. Some will only be completed in late 2013 and 2014. In order to attract buyers, developers are offering longer payment periods of up to a year, giving buyers more flexibility.'
The sales rebound has also caught the attention of Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), who says he is aware of a rise in market activity and asking prices.
Chan argues the liquidity injection into the euro-zone banking system and the possibility that the United States Federal Reserve could engage in a third round of quantitative easing could lead to new asset bubbles. To avoid this, he says the tightening measures imposed on residential mortgages will not be moderated.
So what is the outlook? Given that other cooling measures, such as the Special Stamp Duty (SSD), remain in place, property analysts interviewed by LuxeHomes have ruled out the possibility that the resurgence in the sales market is pointing to a more durable recovery.
Chow believes the rebound is likely to be short-lived and may lose steam after this month. 'As the SSD and tight mortgage rules remain effective, I do not expect market activity to revisit levels in the first half of 2011,' he says.
Lau says overall jobless rates remain very low, although the banking sector has taken a hit. A high level of job security simply means existing home owners are in no rush to sell, while buyers want to buy a home for the family. Buyers and sellers will be playing tug of war again soon. The government has acted to boost residential land supply by selling development sites on a regular basis. According to Midland's forecasts, about 16,000 new homes will go on sale this year, up from about 9,000 units delivered last year.
'Developers now hold the key to unlocking this stand-off,' Cheung says. 'If new projects continue to sell well at the current pricing levels, they will continue to drive market activity. Conversely, sales may come to a standstill again if developers quickly raise prices because the buyers out there are sensitive to price hikes.'