China property

Hong Kong and China diverge over home-buying sentiment

Surveys find city's prices will fall on rate worries while China prices seen gaining on policy aid

PUBLISHED : Sunday, 04 October, 2015, 11:35pm
UPDATED : Wednesday, 07 October, 2015, 2:08pm

While public sentiment about home prices is souring quickly in Hong Kong on concerns about the slowing economy and rising interest rates, a growing number of households in China are expecting prices to rise under the government's supportive measures, surveys showed.

China's economic slowdown weighs heavily on both, but Hong Kong is maintaining curbs enacted since 2012 including heavier stamp duty against non-local buyers, while China's central authorities have been relaxing policies in the past year to stimulate housing demand as part of its efforts to prop up the world's second-biggest economy.

In its latest step, the People's Bank of China on Wednesday lowered the down payment for first-home buyers in all cities except Beijing, Shanghai, Shenzhen, Guangzhou and Sanya to 25 per cent from 30 per cent, just as developers gear up to launch more projects in last ditch bids to hit their annual sales targets.

"We expect more credit stimulus ahead," said Venant Chiang, a property analyst from Jefferies.

Such moves are refuelling housing inflation expectations, as the central bank's latest quarterly survey, released on Wednesday, showed 18.7 per cent of 20,000 households across 50 cities expected home prices in China to increase in the next three months, up from 18.2 per cent in the second quarter and 15.6 per cent in the first quarter.

It outnumbered the 14.4 per cent who expected a home price fall. The majority - 53.3 per cent - projected prices to remain largely unchanged.

At the industry's peak in the third quarter of 2013, 35.8 per cent of the respondents expected China's home prices to rise. But a downturn started in early 2014, triggering measures including cash subsidies in some cities to aid an industry that is crucial to local governments' revenues and economic growth.

The central bank's latest survey also showed 49.7 per cent of the respondents regard current home prices as "unacceptably high", and that 13.8 per cent said they planned to buy within three months.

The recent improvement in home buying sentiment in China contrasts with that in Hong Kong, where a survey showed the public started to expect home prices to fall for the first time since 2013.

Phone interviews of 762 people by the Chinese University of Hong Kong on September 21-24 showed 31 per cent predicted home prices to fall in the coming year, beating 13.9 per cent who expected a rise.

Such a result echoes recent calls by a rising number of analysts that Hong Kong's 12-year housing market bull run will end soon, as rising interest rates in the United States will add to the downward pressure already brought by falling visitor arrivals.

As Chinese shoppers switch to Japan, South Korea and even Europe, Hong Kong's retail sector has already felt the pinch, pushing down rental prices in the city's prime locations such as Causeway Bay and the Central business district.