A dire warning has come from global property consultancy Savills that property prices in Hong Kong may drop by up to 20 per cent across the board owing to latest anti-speculation measures taken by the government.
The prediction follows in the wake of a sharp drop in sales of commercial and residential properties since the government raised stamp duties payable on all commercial and non-residential properties sales effective from February 22.
Together with previously announced measures such as a Buyer's Stamp Duty, levies on sales of residential properties valued at more than HK$2 million were increased by as much as 23.5 per cent, and by 8.5 per cent on non-residential properties.
The fall in deal volumes and prices as well as big-ticket sales will continue at an even faster pace, Raymond Lee, chief executive of Savills, said. "Since the measures were introduced I do not believe we have seen any transactions valued at more than HK$100 million."
Lee cited the case of Opus, a luxury residential development built in 2012 by Swire Properties, as an example of the impact of the new measures. "The property is valued at more than HK$400 million. Under the new measures a buyer will need to pays taxes of HK$100 million. In such a situation who will still want to buy?"
In addition, property owners were under no pressure to sell, because their holding costs remain low, resulting in a "painfully quiet market", according to Lee.
More retailers were meanwhile becoming aware of the impact of high rental costs and the impact on their bottom lines, and Lee said rents and prices of retail and office properties could be expected to soften this year after sharp rises in the past few years.
If there were no drastic changes in interest rates or the external environment, the rise in retail rents in 2013 was expected to slow to just zero to five per cent across the board, Savills noted in a report released earlier this month.
But while rents for prime street shops in areas such as Russell Street in Causeway Bay and Canton Road in Tsim Sha Tsui remain firm, retail prices may see a bigger fall of about 10 per cent to 15 per cent this year, it says.
"Hong Kong's property market is like a patient getting early stage cancer. However, our government gives it medicine that is designated for final stage cancer patients," Lee said.
"The high dosage kills both good cells and cancer cells. The patient will also die."
He proposed that the government should ease the doubling of stamp duty on non-residential properties and luxury homes in a bid to encourage sales.
"Those sectors do not affect people's lives. Why should the government impose restrictive policies on them?"