Property stamp duties announced at the end of October are leaving deep scars in Hong Kong's housing market, with sales activity plunging about 70 per cent and prices retreating.
However, some leading developers believe that time can heal all wounds.
Cheung Kong (Holdings), Sun Hung Kai Properties, Kerry Properties and HKR International are betting that buyers - local or non-local - will come back, given enough time. That could be after the Lunar Year holiday.
Price-cutting was not being considered at the moment, they said.
"It will take time for the market to digest the cooling measures," Justin Chiu Kwok-hung, executive director of Cheung Kong (Holdings), said.
"A clear picture of buying desire will be seen after the Lunar New Year," said Chiu, who expected mainlanders would return once they became accustomed to the new measures.
"Mainlanders may love to buy luxury handbags in Europe, but they do not fancy buying properties there. Their favourite is still the Hong Kong property market, with which they are familiar," he said.
On October 26, Financial Secretary John Tsang Chun-wah announced what he called "extraordinary measures under exceptional circumstances" to stem a flow of hot money into the city. The measures included a special tax of 15 per cent - known as buyer's stamp duty, with exemption for permanent residents who buy under their own names.
Buyers who are not permanent residents accounted for 19.5 per cent of primary market transactions last year, up from 5.7 per cent in 2008.
In a second measure, the government raised by 5 percentage points the rates of an across-the-board "special stamp duty" to curb speculation, and extended the limit on resales from two to three years. A fee of between 10 per cent and 20 per cent of the price is payable if the property is resold in the period.
The measures were announced as prices for small and medium-sized flats rose 21 per cent in the first nine months of the year, increasingly pricing average people out of the market.
According to international property consultant Jones Lang LaSalle, interest rates and tight supply saw overall capital values in the mass residential market soar by 20.3 per cent year on year to the first 11 months of 2012.
Capital values in the luxury residential market, on the other hand, grew by 5 per cent year on year, over the same per iod.
Centaline Property Agency said home prices rose 17 per cent last year.
Anecdotal evidence has suggested that sales volumes have dropped sharply since the new measures took effect.
Mass residential prices, however, appear to be holding up, edging down marginally by less than 1 per cent in October and November combined.
Wheelock & Co vice-chairman Stewart Leung Chi-kin said: "I am not sure if prices will drop. If it happens, the fall will be limited to within 5 per cent."
Leung, also chairman of the Real Estate Developers Association, wants residents, including company directors, to be exempt from paying stamp duty for flats costing at least HK$30 million or above. The proposal was rejected by authorities.
Amy Teo, a project director at Sun Hung Kai Real Estate Agency, said the developer had no plan to cut prices.
"In a low-interest-rate environment, there will be stable and healthy development in the property market," she said.
According to consultant Jones Lang LaSalle, an estimated 15,500 flats were expected to be completed this year, still below the 10-year average of 16,700 homes a year.
Further down the pipeline, 13,600 flats are expected to be completed both next year and in 2015 before rising to 17,800 homes in 2016.
"As a major developer, we will continue launching projects in answer to the government's call to increase supply. It will also provide more choices for home buyers in different districts," said Victor Lui Ting, Sun Hung Kai Properties deputy managing director.
The developer plans to offer three projects, involving 1,295 flats, for sale over the next two months. They are The Wings phase-two development in Tseung Kwan O, Residence 88 in Yuen Long and Imperial Kennedy in Western district.
"The government's curbs are beginning to take effect," Lui said, fearing , a slide in sales and drop in prices.
Chan Chi-ming, the head of the Hong Kong business unit at developer HKR International, took the impact of the first round of special stamp duty as a reference point.
He said the market suffered six months of slow sales after the government introduced the special stamp duty to curb speculation in November 2011. Then buyers came back.
"With Hong Kong's strong economic fundamentals and ample liquidity, the buyer's stamp duty only has psychological impact. We will see fewer buyers in the short term as most of them would take a wait-and-see attitude," Chan said.
"December is a traditional low season for property sales."
He hoped market sentiment would improve for the Lunar New Year, which is a peak season.
Chu Ip-pui, executive director at Kerry Real Estate Agency, expected the doldrums to last less than six months as buying desire and purchasing power were strong.
According to government data, there were 56,000 households enjoying monthly income of HK$40,000.
"On the basis of the current interest rate, that can buy a 600 square foot flat assuming that 40 per cent of their income is used for monthly mortgage payment," he said. "Home prices will stabilise next year."
But not every developer is optimistic.
"The introduction of the two stamp duties will affect the future of Hong Kong's economy. The impact will depend on the market response in the coming three months or more," K Wah Group chairman Lui Che-woo said.
"It would affect people's livelihood if the property price dropped further."
In terms of sales strategy, Nan Fung Development's deputy general manager Raymond Lai Hok-leung said it could be more challenging to set prices.
The developer is planning to launch its Tung Chung residential project in the second quarter of next year, which will offer about 1,400 one-bedroom to four-bedroom homes.
"It may be a bit early to say, but I believe it will require more effort for us to set the prices. We need to check the market situation first because of a drop in foreign and corporate buyers due to the buyer's stamp duty, " Lai said, adding that in some projects and districts, up to 30 per cent of purchasers were non-local and company buyers.
Home sales volume was currently low, but the impact of the new tax on prices was yet to be seen, he said.
An executive of a Hong Kong developer highlighted the serious impact of the new measures.
"Do you really think that it has no impact on the market if corporate clients established by Hong Kong residents do not come back to the market?" said the executive.
"Take a look at the recent transactions, those buyers who were willing to pay buyer's stamp duty were mainlanders. Have you seen Hong Kong companies purchasing after the measures?"