Hong Kong home prices expected to be down 5 per cent from their peak by Chinese New Year

Ricacorp Properties survey of 50 Hong Kong housing estates finds that November prices fell on average 1 per cent from October, with some estates seeing a drop of up to 7.6 per cent month on month

PUBLISHED : Thursday, 10 December, 2015, 9:27pm
UPDATED : Thursday, 10 December, 2015, 9:27pm

Hong Kong’s home prices have continued their downward momentum with average home prices at 50 housing estates falling for three consecutive months, a private survey shows.

November prices on average fell 1 per cent from October but some estates reported a drop of as much as 7.6 per cent month on month, according to a survey of 50 housing estates by property agent Ricacorp Properties.

“There is a consensus expectation of a price fall. Prospective home buyers will not enter [the market] if flat owners do not slash prices,” said Derek Chan, head of research at Ricacorp Properties.

With transaction volumes still low, last month’s decline does not reflect the full state of the market.

Chan said prices would fall gradually, predicting a 1 per cent decline this month and another 1 per cent in January.

“Average prices will drop to HK$11,609 per square foot before Chinese Lunar New Year, about 5 per cent below the market’s peak of HK$12,243 per sq ft in August this year,” he said.

One of the hardest hit estates was Amoy Gardens in Ngau Tau Kok, which recorded four transactions in November against five in October, with last month’s transaction price of HK$11,733 per sq ft down 7.6 per cent from the prior month.

Property consultant Knight Frank said sales in Hong Kong’s secondary market will remain in the doldrums for the foreseeable future.

With the government’s property cooling measures still in place, a potential US interest-rate rise and more housing supply in the pipeline are factors that have prompted potential buyers to adopt a wait-and-see approach, resulting in subdued sales transactions in recent months.

“We expect total home sales volume for 2015 to reach around 55,000, down 14 per cent from 2014,” said Thomas Lam, a senior director and head of valuation and consultancy at Knight Frank .

A number of buyers have also shifted to the primary market, attracted by competitive prices and preferential incentive packages offered by developers.

As a result, the proportion of primary deals reached 27 per cent of all salesduring the first 9 months of 2015, compared with only 10 per cent in 2010, said Lam.

Lam expects luxury residential prices to fall 5 per cent in 2016, while mass residential prices could decrease by 5-10 per cent.

He called for the government to introduce alternative incentives, such as increasing plot ratios and relaxing height restrictions on buildings, to encourage developers to speed up new projects to increase residential supply.

Analysts expect sales volumes will pick up next year as more flat owners would be willing to cut prices in the face of the slower market performance.

While Hong Kong residents show weaker home buying interest, Knight Frank said mainland buyers are still interested in the luxury segment of the market despite the government’s continuing cooling measures such as double stamp duty.

During the first 10 months of 2015, mainland buyers accounted for four out of the top 10 luxury deals, according to Knight Frank.