Beware of drowning as property policy changes the tide
Buyers run risks if they fail to factor in plan by chief executive to boost housing supply
If transaction volume is an indication of public confidence in the vision laid out for the property market by Leung Chun-ying in his first policy address last Wednesday, the new chief executive will be disappointed.
Shrugging aside assurances that housing supply increase and so pressure on prices would ease, buyers stormed into the market after the speech and many sellers reportedly raised their asking prices by 5 to 10 per cent.
In the primary market, 223 flats were sold at the weekend, up by almost half on the number sold in the previous weekend, according to a report by BNP Paribas.
In the secondary market, 46 flats were sold in the 10 largest residential estates tracked by Centaline Property Agency, the most since May last year and 44 per cent higher than that of the previous weekend.
The big jump in sales arose partly out of relief that Leung did not use his first policy address to announce a further crackdown on demand and price growth in the housing market. Instead, he unveiled ambitious plans to boost land supply and address the city's acute housing problems.
In the short to medium term, he aims to add 300 hectares to the amount of land designated for housing, an area capable of yielding 128,700 new flats by 2020.
The supply of public flats, he said, would rise from 15,000 units a year to 20,000 only from 2018.
But the rush to buy after his policy address suggests that homebuyers jumped into the market because they saw no quick relief from price rises.
What accounts for this enthusiasm at a time when such tightening measures as the extended stamp duty and buyer's stamp duty are still in place?
Part of the answer is that some buyers were encouraged to join the herd by the views of some agents and analysts.
BNP Paribas said the impact of future supply on the private residential market was limited in the short term, while Bank of America Merrill Lynch expects home prices to rise this year.
Shih Wing-ching, the founder of Centaline Property Agency, who had predicted that home prices would fall by 5 to 10 per cent when the government announced the two stamp duties at the end of October last year, now expects home prices will go up 5 per cent in the first quarter.
Shih said his prediction was based on the booming buying sentiment. However, he said the present buying sentiment was emotional and warned of the policy's risks and future supply.
I recall that at the peak of the market in 1997, when former chief executive Tung Chee-hwa pledged to roll out an annual supply of 85,000 new units, the initial reaction of many analysts then was also not to take it seriously.
No one has a crystal ball that reveals the future for the city's housing market.
But it may be worth recalling the famous saying "Don't fight the Fed" - an important piece of Wall Street wisdom advising investors not to take a position that flies in the face of existing monetary policy, as announced and implemented by the Federal Reserve.
When the Hong Kong government pledges to make tackling the housing problem - specifically by increasing supply - its top priority, would it be wise to ignore those undertakings?
Judging by the weekend rush to buy homes, many people are now swimming with the tide of rising home prices.
But the direction of the tide is changing, as Leung indicated, and those who fail to factor this in could soon be sunk.