Fears of more intervention as home sales rebound

Home sales and prices have begun to rebound in Hong Kong, triggering concerns that the government might intervene again to keep the lid on demand if activity gains too much momentum.

Sales and prices have improved despite a decline in demand from mainland and corporate buyers, whose purchases have slowed since the authorities introduced taxes aimed at non-local and corporate buyers late last year.

Home prices retreated by 1.6 per cent from a record high after the introduction of a new buyers' stamp duty and adjusted special stamp duty on October 27. But prices have since recovered and are back at fresh highs, according to Macquarie Securities.

The Centa-City Leading Index, which tracks home prices in 100 housing estates in Hong Kong's secondary market, rose 0.63 per cent week on week to 119.13 on February 1, a record. The index's benchmark of 100 reflects prices in July 1997.

David Ng, an analyst at Macquarie Securities, said the notable absence in last month's policy speech of any new short-term measures to curb demand in the property market sent a positive signal to buyers.

Secondary market sales monitored by estate agency Ricacorp Properties in the city's 50 major housing estates were up 19 per cent week on week to 321 during the week from January 14-20, according to the agency. Following this strong rebound in sales, activity slowed last week because sellers responded to the increased demand by raising their prices, agents said.

"We expect this momentum to continue into February, causing the government to launch another round of demand-side measures in March, when price growth may exceed 2 per cent per month," Ng said in a report released on January 28. For the full year, he expects home prices to fall by 10 per cent.

Paul Louie, regional head of property research for Nomura, warned that the pool of buyers was shrinking as mainland and corporate investors withdrew from the market.