Shares of Hong Kong property developers slumped yesterday on fears that tighter home buying rules will frighten cash-rich mainland buyers and cause a slide in property prices.
Leading the declines were New World Development, whose shares have more than doubled this year, and Sino Land, which was downgraded to a neutral rating by UBS yesterday owing to its high exposure to the luxury home market.
New World shed 6.36 per cent to close at HK$12.08 while Sino Land lost 6.4 per cent to end at HK$13.74.
"It was like panic selling - everyone flocked to take profit," said Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi.
He said the selling "will last for a while before people fully digest the shock", referring to the government's move last week to impose new property stamp duties to discourage speculation.
The Hang Seng Property Index, which tracks seven major local property developers and two mainland developers, lost as much as 3.71 per cent at the end of trading, after gaining 30 per cent this year. The benchmark Hang Seng Index dipped 0.16 per cent yesterday.
Property broker Midland Holdings slumped 14.51 per cent to HK$3.83.
Yesterday's slump means the six richest property developers in Hong Kong lost a combined US$2.2 billion in net worth, according to Bloomberg.
The wealthiest man in Asia, Li Ka-shing's net worth declined US$748 million to US$26.3 billion from Friday, as shares in Cheung Kong (Holdings) slid 4.7 per cent. Henderson Land Development chairman Lee Shau-kee's net worth dropped US$462 million to US$22.7 billion.
With investors dumping developers' shares, key market players and analysts however see limited room for home prices to fall and there may be bargain-hunting in the sector after the current sell off.
"We believe any dip in Hong Kong property stocks on Monday would simply represent an enhanced buying opportunity," Citi analyst Ken Yeung said in a note.
Stabilising home prices, due to the decline in mainland and corporate buyers, would remove policy risk and asset bubble concerns, the report said.
Nomura analysts led by Paul Louie expect transaction volume to drop by 15 to 20 per cent, while home prices are likely to pull back by only 3 to 5 per cent in the coming one to two months.
"We expect the new measure will cool sentiment and lower market volumes, in particular the resale market," UBS's Eva Lee said. But she said property prices are "unlikely to have any significant correction".
Walker Kwok, former chairman of Sun Hung Kai Properties, said yesterday the government measures should have only "a very short-term impact".
"I think in the short term there is some impact, some psychological impact," he said. "But in the medium to long term there will not be much negative impact on the property market."
Additional reporting by Bloomberg