Cooling efforts bring no joy for priced-out buyers

PUBLISHED : Monday, 03 June, 2013, 12:00am
UPDATED : Monday, 03 June, 2013, 5:05am

Policy measures intended to cool the hot property market have so far failed to reduce housing prices to more affordable levels, say disappointed home-seekers.

"I still can't afford to buy a home. Prices have not shown any major falls since the government measures were announced three months ago," said Andy Cheung, an insurance agent who is renting a two-bedroom unit with his wife and daughter in Tsuen Wan for HK$15,000 a month.

"The asking price of a two-bedroom unit at Discovery Park is HK$4.5 million, which is more or less the same as it was before the measures were announced," said Cheung, who last week viewed a second-hand flat being offered for sale in Tsuen Wan.

Cheung's disappointment comes as no surprise. An analysis of the city's economic performance released by the financial secretary's office last week showed that home prices edged down by just 0.1 per cent in March, and a further 0.7 per cent in April.

Stacked up against falling household incomes, that lifted the first-quarter home purchase affordability ratio - the bite taken out of monthly household incomes by the average mortgage payment - to 56 per cent.

That was a big jump from 52 per cent in the preceding quarter, equal highest in the past 20 years with the rate recorded in the first quarter of 1999, and well above the long-term average of 47.9 per cent.

Both affordability and price data show that nothing has changed for house hunters like Cheung, despite a statement from Midland Realty, a leading property agent in the city, that some home prices have fallen 2 per cent since the measures were announced in February.

Measured across the market, however, latest data shows prices are still on the rise.

The Centa-City Leading Index, which tracks second-hand prices in 100 housing estates, rose 0.23 per cent week on week to 119.06 for the week to Friday, following a rise of 0.18 per cent in the previous week.

"I do not see any major correction in home prices this year amid the low interest rate environment," said BNP property analyst Patrick Wong Chi-leung.

On February 22, the government announced a doubling of the stamp duty levied on the sale of residential and non-residential properties priced above HK$2 million.

In a pledge to make homes more affordable, the government previously announced other measures including a new 15 per cent tax, known as the buyer's stamp duty, on non-local and corporate property buyers to curb prices and speculation in October last year.

But BNP data shows that in the first two months of this year average home prices rose 2.6 per cent per month.

"Prices continued to rise at the beginning of this year even though a buyer's stamp duty was introduced. But the rise stopped and transaction volume plunged after the doubling of the stamp duty was introduced," Wong said.

Together with the buyer's stamp duty, levies on the sale of residential properties for non-locals or corporate buyers were increased by as much as 23.5 per cent, and by as much as 8.5 per cent for Hong Kong permanent residents who already own a flat.

"The transaction costs are too high. I will not enter the market now," said an investor who asked not to be named.

She sold a number of flats in Mei Foo last year.

Lacking support from investors and mainland buyers, the housing market is now basically supported by end-users, especially first-time buyers.

The withdrawal of the big spenders has seen monthly home sales fall by 24.4 per cent month on month to 3,427 transactions, according to April statistics, which largely reflect sales activity in March.

That was well below the average of 6,778 per month last year, according to the government. During the May 25-26 weekend, 20 units were sold in the top 10 estates, according to Midland, representing a decline of 28.6 per cent week on week.

The primary housing market was painfully quiet, following the implementation of stricter marketing regulations contained in the Residential Properties (First-hand Sales) Ordinance, which left just two projects available for sale.

However, sales of government-subsidised housing in the secondary market achieved better results. There were 94 units sold in April, up 22.16 per cent month on month, the highest in three months.

The most expensive second-hand Home Ownership Scheme unit was sold in Shau Kei Wan in April, at a price of HK$5.08 million.

Bocom International property analyst Alfred Lau said home-seekers were unlikely to find homes becoming more affordable, since interest rates were expected to rise gradually as the United States Federal Reserve begins cutting its bond-buying programme.

The US central bank's policies have up to now injected liquidity into the market and helped keep rates low.