The fall in luxury home prices will soon extend to prices in the mass housing market because all sub-sectors of the market tend to move in tandem, property analysts say.
Some predict a decline in mass market prices of as much as 20 per cent in districts that face a glut of new supply.
The new homes for sale at the Cullinan and Austin were in prime locations and yet developers felt the need to cut prices to draw buyers, said Alva To, the managing director and head of consulting, North Asia, for property brokerage DTZ.
"How about properties in other less attractive areas?" he asked.
Sun Hung Kai Properties, the world's second-biggest developer by market value, last week offered discounts on homes at the Kowloon Station luxury development, Cullinan. And New World Development and Wheelock undercut secondary market prices to launch their project, the Austin, located above the Austin MTR Station.
The developers have also offered stamp duty rebates in an attempt to boost sales.
To said developers were now expected to cut prices of homes in new mass housing projects to attract buyers, and the domino effect would then extend to secondary sales in the mass market.
"In some districts where you see a lot of supply, such as Tseung Kwan O, prices need to fall 15 to 20 per cent before buyers are likely to come back into the market," he said.
The Centa-City Leading Index, which tracks secondary market prices in the 100 leading housing estates, is still up 3.7 per cent year to date at 119.83. But To said this masked the fact that prices in some estates had fallen by more than 10 per cent.
Joseph Tsang, the managing director and head of capital markets at Hong Kong Jones Lang LaSalle, also said prices were headed downwards. "Developers of luxury projects as well as mid-priced or mass-market homes have to cut prices to attract buyers," he said.
The biggest fall in prices was likely to be seen in the luxury market for properties priced at HK$10 million and above because that segment of the market had been most seriously affected by successive property cooling measures, Tsang said.
"We have experienced two market corrections. One was between 1997 and 2003. The second was during the global financial crisis in 2008," he said.
"On both occasions, we saw a fall in luxury home prices extending to the mass housing market."
This time round, however, demand for owner-occupied homes was stronger and buying power was better, partly helped by low interest rates and a stable economy, Tsang said, noting that interest rates were more than 10 per cent during the 1997-98 period.
As a result, the fall in prices of flats requiring a smaller lump-sum down payment would be less than the fall in prices of luxury homes.
Craig Shute, a senior managing director for Hong Kong, Macau and Taiwan at property broker CBRE, said it seemed increasingly unlikely that developers would move to offer any significant discounts in the mass residential market until lending rates increased sharply or substantial new supply arrived through looser government land policy.