The government's cooling measures for the overheated property market have been in force for 10 months. Yet prices remain high, making it harder for average people to buy their own home.
Research by property consultant Knight Frank shows prices have fallen only 3 per cent since the government introduced further housing measures in February. Many end-users are therefore still finding it difficult to buy affordable flats. The problem is likely to be exacerbated as mainland buyers and local investors return to the market.
Recent sales of new projects such as The Avenue in Wan Chai, The Cullinan and The Austin in Kowloon have attracted investors by offering them subsidises on stamp duties. This has lowered the investment cost for investors and mainlanders.
Agents estimated about 70 per cent of the buyers at The Avenue were investors, compared with about 30 per cent for The Visionary in Tung Chung.
As the sweeteners help boost sales, developers are expected to maintain similar benefits for upcoming projects.
Thomas Lam, head of research and consultancy for Greater China at Knight Frank, expects the proportion of mainland buyers in the primary market to increase to 10 per cent next year from 5 per cent now.
This is bad news for average homebuyers as they will have to prepare more of a down payment or find it difficult to obtain a mortgage loan. Even if they can get the loan, they still have to pay double stamp duties unless they are first-time buyers or have already sold their flats.
Mainlanders and investors are cash-rich. Most of them are targeting new projects in the city centre and this will support the price of new homes in Kowloon and on Hong Kong Island. Even though the supply of new housing will increase next year, only 23 per cent will come from Kowloon and Hong Kong Island.
It is true that the developers are building more small flats. But it doesn't mean they will be affordable. Take the second phase of The Avenue. The project will offer 1,096 flats, of which about 68 per cent are studio and one-bedroom flats sized between 334 and 535 square feet. The minimum price for a small flat is HK$6.1 million.
While the price tag is unaffordable for many, these flats are considered a good buy for investors as it is easy to find tenants in such a prime location.
In the secondary market, only 33,997 private housing units changed hands in the first 11 months of the year. The annual volume will be far below the 62,934 deals recorded in 2012. Despite the poor sales, most of the flat owners are not willing to cut asking prices as the mortgage rates for their units are low.
Many people have hoped the price of second-hand homes would drop following the increase in new housing supply and price cuts at new projects. However, as the local economy remains strong and mortgage rates are low, most flat owners will be reluctant to cut asking prices. Property prices in urban area will not drop significantly.
Only a rise in interest rates could change the situation.