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.
According to a Centaline Property Agency survey, an estimated 8.7 per cent of new flats sold in Hong Kong in December were bought by mainlanders. In October and November, the proportion was about 20 per cent.
Demand from corporate buyers is also down since the October tax measures, and only 5.3 per cent of both new and used flats were bought by companies last month, down from 10 per cent in October and November.
"That data confirms the pool of demand is getting smaller and smaller," Louie said, warning the market had underestimated the accumulated effects of measures introduced over the past few years to contain price growth.
Local homeowners aiming to upgrade to bigger flats have also begun to feel the pinch, finding it more difficult to raise finance since the Monetary Authority introduced the first round of tightened lending measures since 2009.
Three years ago, weekly transactions at 35 housing estates monitored by Midland Realty stood at 250.
Last year the average dropped to 140, Louie said.
"The pool of demand has dropped by some 40 per cent," he said, adding that local demand could not fill the vacuum left by the exodus of cash-rich mainland buyers.
"Affordability is the big theme for 2013," Louie said. "Can local buyers afford a unit costing HK$30 million to HK$40 million? I don't believe there are too many who can."