Second-hand home transactions hit historic lows

Home sales in the secondary market have plunged to historical lows, hit by increased mortgage rates and developers' competitive pricing strategies on new developments that have lured home seekers away from the second-hand housing sector.

With buyers sidelined as they await clearer pricing signals, analysts and property agents believe demand will not pick up again until prices in the mid- to mass housing markets fall by 10 per cent or so, and by more in the luxury sector.

"There have been only three transactions in Taikoo Shing so far this month," said Kenneth Chiu, assistant sales manager for Centaline Property Agency's Taikoo Shing branch. "It is even worse than the 20 deals done during the Sars scare," he said, referring to the outbreak of severe acute respiratory syndrome in 2003.

Average transaction prices in the estate are around HK$11,852 per square foot.

The slump comes as the secondary market wrestles with a "double-whammy" of increased mortgage rates and sweeteners offered by developers to help shift units in newly released projects. The fresh challenges follow on the doubling of stamp duty payable by buyers of second homes introduced last month.

Hongkong & Shanghai Banking Corp, the local unit of global banking group HSBC and the city's biggest home lender with total residential mortgages of HK$686 billion as at December 31, took the lead in raising its rates on new home loans by 25 basis points to between 2.85 per cent and 3.15 per cent, from between 2.6 and 2.9 per cent. The variation depends on borrowers' credit records. Standard Chartered, Hang Seng and Bank of East Asia followed with similar rises.

"The housing market is entering a turbulent period," said Chiu. Besides a landslide in sales of luxury homes, districts like Tin Shiu Wai where average transaction prices were HK$4,400 per sq ft for the area's most active housing estate, Kingswood Villas.