High prices peg back Hong Kong home sales despite rise in supply
Big run-up in prices leaves owners in no rush to sell and buyers hoping values will fall, a standoff that's caused a drop in deals
Homeowner Winnie Cheung has no intention of profiting by selling her apartment in the blue-chip housing estate of Taikoo Shing in Quarry Bay, even though its value has risen by some 55 per cent to HK$7 million in three years.
"The rapid rise in home prices is a bit crazy," said the young sales executive. "I have several friends who sold their flats but the money they received was hardly enough to buy a similar-sized flat in Taikoo Shing.
"They ended up either buying smaller flats in the same housing estate or moving to a less convenient location."
Cheung and her husband bought a 662 square foot flat in Taikoo Shing for HK$4.5 million, or HK$6,790 per square foot, in May 2009. "Even though the government's move last week to increase flat supplies may bring down home prices, flat values in Taikoo Shing are unlikely to return to the levels they dropped to in 2009," she said.
Chief Executive Leung Chun-ying last week announced a 10-point plan to increase supply to stabilise home prices.
The measures include the sale early next year of 830 Home Ownership Scheme (HOS) flats in Tin Shui Wai that were put on hold because of a short-piling problem in 2000; selling 1,000 flats in Tsing Yi under the My Home Purchase Plan to families earning less HK$40,000 a month at a discount; converting the Chai Wan Factory Estate into public housing to create 180 units; and rezoning for residential use 36 sites designated for "government and recreational" purposes.
Homeowners like Cheung are in no hurry to sell or refuse to lower their asking prices because they don't expect the measures to trigger a drop in prices. Buyers, meanwhile, are hoping that prices will come down.
The conflicting expectations, say agents, are contributing to slowing sales.
Ricacorp Properties data shows that sales in the 50 estates that it monitors dropped 14 per cent to 297 deals during the week of August 27 to September 2, compared to 344 a week earlier.
"That is a seven-week low. The government measures have cooled market sentiment but owners' high asking prices are also killing buyer interest," said Ricacorp director David Chan.
Meanwhile, Sun Hung Kai Properties' 1,075-unit Century Gateway in Tuen Mun will also lure buyers away from the secondary market, and Patrick Chow, head of research at Ricacorp, said sales of second-hand homes may fall by as much as 70 per cent in coming weeks.
Kenneth Chiu, assistant sales manager for Centaline Property Agency's Taikoo Shing branch, shared Chow's view, noting that the number of flats for sale in Taikoo Shing had fallen to a record low of 710 from 770 at the start of last month. Given the limited choices, he expects home sales in Taikoo Shing to slow this month, though flat prices have so far shown no signs of falling.
Chiu said a 675 sq ft flat at Taikoo Shing changed hands over the weekend for HK$7.92 million, or HK$11,733 per square foot, in spite of the new measures.
"The price is the highest on record for a unit of this size in the estate and the buyer does not believe the government measures will have an adverse impact on the property market," said Chiu.
He said a 2,319 sq ft flat with a 1,402 sq ft rooftop at Taikoo Shing sold on Monday for a record HK$31.4 million, or HK$13,540 per square foot.
In Tuen Mun, a 452 sq ft flat in The Trend Plaza sold for HK$2.79 million, or HK$6,172 per square foot, over the weekend - the highest price recorded for the estate.
Paul Louie, of Nomura, said the government's move to increase supply and help restore the elasticity of supply was a step in the right direction. "The government reiterated that it would continue to monitor the housing market for potential overheating. If required, it will introduce more appropriate measures at the right time," he said.
Cusson Leung, of Credit Suisse, said if home prices continued to rise the government might reduce loan-to-valuation ratios for the purchase of a second home, or increase the special stamp duty for homes sold within two years of purchase.
However, office worker Woo Man-yee said: "No matter how expensive the flats are, there are many non-local buyers who seem to have unlimited amounts of money. Only when you suppress demand from this group will flat prices slow down."