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Home owners may be willing to cut asking bids by 2 per cent. Photo: Reuters

Hong Kong home sales expected to fall amid stock market crash

Home sales could drop up to 20 per cent and prices dip following the stock market turmoil but supply shortage and strong economic fundamentals will continue to support Hong Kong's property market, say analysts.

Home sales could drop up to 20 per cent and prices dip following the stock market turmoil but supply shortage and strong economic fundamentals will continue to support Hong Kong's property market, say analysts.

"It all depends on whether the plunge in share prices is recovered in the coming days. If it's only a momentary dip, the impact on property prices will be minimal," said Charles Chan, property consultancy Savills' managing director for valuation and professional services.

"But if the situation persists and there's no significant rebound of the stock market, property prices will drop eventually."

In the short term, transaction volumes could shrink significantly but Chan said owners would not be willing to cut prices as holding power was still strong.

Buying sentiment is bound to be affected as the market is expected to remain weak in the next few months, said Sammy Po Siu-ming, chief executive of Midland Realty's residential department.

Po said he expected transactions for second-hand flats to fall 10 per cent to 20 per cent to about 3,000, back to this year's lowest level in March following the Hong Kong government's last round of cooling measures.

Sales volume in luxury homes - valued at HK$10 million or above - will drop by up to 20 per cent month on month, according to Po. He said, before the crash, he had expected luxury home prices to rise up to 15 per cent this year on the back of the wealth effect created by the stock market boom. "Without this factor, luxury home prices will go up only modestly," he said.

Following the swings in the stock market, some home owners were willing to cut asking bids by 2 per cent to 3 per cent, he said. After the recent stock market fall, one unit at Flourish Court in Mid-Levels West was sold in April for HK$21.5 million, HK$3 million below the asking price of HK$24.5 million.

Bocom International analyst Alfred Lau warned of hidden risks in the property market.

"Some mainland property owners have been forced to cash in their assets here to support stock investments on the mainland. If this becomes a trend, the Hong Kong property market outlook will change," said Lau.

According to the Land Registry, a buyer sold a duplex unit at The Westminster Terrace in Tsuen Wan for HK$39.98 million, HK$4.4 million below the price he paid for it in 2012. Agents said the owner was a mainlander.

But Po said he did not expect a spurt of loss-making transactions unless the Hang Seng Index continues to fall sharply.

Nicole Wong, a regional property research head at CLSA, was similarly optimistic.

"There are no major changes in Hong Kong's fundamentals such as low interest rate and limited supply," said Wong, adding the stock rout might prompt some to invest in property.

This article appeared in the South China Morning Post print edition as: Home sales could fall on stock chaos
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