Estate agents believe home prices in Hong Kong could drop a further 5 per cent in the second half of the year, bringing the total decline for 2013 to around 10 per cent.
"Prices have already dropped by 4.5 per cent from the market peak in February due to the introduction of new stamp duties," said Midland Realty chief analyst Buggle Lau Ka-fai. "They could fall 5 to 10 per cent for the whole year."
Sales are tracking prices downwards, and Midland has also revised its forecast on transaction volumes. Executive director Vincent Chan now believes some 53,000 flats will be sold in the secondary market this year, down from a previous forecast of 58,000 to the lowest level since 2003 when the outbreak of severe acute respiratory syndrome (Sars) triggered a collapse in flat sales and prices.
Weekly sales in the 35 housing estates monitored by the agency were up more than 20 per cent to 105 deals last week from a week earlier. But that is less than half the average weekly sales of 200 to 250 deals before the cooling measures were introduced.
In the new home market only 197 flats were sold from the introduction of the Residential Properties (First-hand Sales) Ordinance on April 29 to the end of May.
"Capital may leave Hong Kong following the improvement of the US economy," Chan said. "With the impact of the cooling measures in the Hong Kong property market, property prices may drop dramatically. The government should prepare a plan to withdraw the measures."
Centaline Property Agency founder Shih Wing-ching said property prices will continue to drop due to uncertainties over both the political and economic environments. "It will be difficult to solve the current political disputes and interest rates may rise. These factors will lead to a further fall in property prices," he said.
Centaline managing director Louis Chan Wing-kit said that in the short term, though luxury flat prices could drop by up to 15 per cent, prices of second-hand homes valued at less than HK$5 million could rise by 10 per cent in the second half.
"The 5,000 'white-form applicants' [who are eligible to buy second-hand Home Ownership Scheme flats without paying a land premium] will boost the sales of small flats. Also, under the cooling measures, first-time buyers are not affected by the new stamp duties and most of them would buy small flats," he said.