Property cooling measures and continuing concern about the pace of the world's economic recovery will continue to cloud the outlook for the city's housing market, according to property consultancy DTZ.
Overall residential prices in the secondary market have dropped about 5 per cent since the government announced the doubling of stamp duty on February 22, it noted.
At the popular housing estate Taikoo Shing in Quarry Bay, the average transaction price this month was HK$10,800 per square foot, down 5 per cent from selling prices in the area before the introduction of the measures.
New-home sales also felt the impact as some developers offered more favourable terms, such as stamp duty rebates, in selected projects to entice homebuyers.
Taking into account the rebate concessions offered by developers, the effective selling prices for some new flats were down by between 5 per cent and 10 per cent.
"The latest property curbs launched by the government have led to an obvious turn in sentiment and the transaction volume of properties. In general, home sales activities have contracted by about 40 per cent since the property cooling measures came into force," said Alva To Yu-hung, DTZ's managing director, Hong Kong, and head of consulting, North Asia.
"The overall residential market sentiment has become less favourable in the near term," he said, and DTZ remained cautious about prospects for the market for the next few months, although it continued to see strong underlying housing demand.
He expected developers would release their new projects steadily at less aggressive prices or with more sweeteners to draw buyers in the coming months.
In the investment market, the doubling of stamp duty on residential and non-residential property transactions above HK$2 million, which effectively raised the cost of trading, scared off short-term investors wishing to buy en-bloc offices and sell the premises on a strata-title basis afterwards for quick profits, said Kenneth Yip, director of DTZ's Hong Kong investment division.
Retail and office properties would still be the preferred assets for most investors given the strong end-user demand and leasing interest, Yip said.