Mainland Chinese investors back off luxury home market in Hong Kong
New stamp duties brought in to cool city's property market have made many mainland buyers think twice about investing in high-end flats
Hong Kong luxury homes may lose their mantle as the most expensive in the world as measures aimed at curbing property prices begin to bite this year.
Finding wealthy buyers in the present climate is proving increasingly difficult as investors turn away from the market because of concerns over the measures, say analysts.
"We will not invest in the local luxury residential market in the short term," said Tai Hung Fai Enterprise chairman Edwin Leong Siu-hung, a veteran investor in luxury properties.
Prices of homes costing around HK$10,000 per sq ft, such as in Mid-Levels, would probably hold up, taking into account high land costs, Leong said, but the prices of those valued at between HK$30,000 and HK$40,000 per sq ft would fall as demand declined because of concern about the risk of further measures being introduced to rein in the market.
"The introduction of extra stamp duties has kept mainland and overseas investors away from the market," said Leong, recently ranked by Forbes as the 25th richest man in Hong Kong.
The government has brought in a 15 per cent additional tax levied on property purchases by corporate and non-permanent-resident buyers - known as the buyer's stamp duty - and doubled the stamp duty levied on all sales of flats and non-residential property worth over HK$2 million. The measures are expected to remain in place this year, keeping a firm lid on investment demand.
A report by international property consultancy Knight Frank shows that mainlanders accounted for 10 per cent of sales of high-end homes worth HK$12 million or more in the first quarter of this year - the lowest level since the first quarter of 2007. They bought more than 40 per cent of such homes in the first quarter of 2011.
Corporate buyers accounted for less than 5 per cent of luxury- home sales in the first quarter, compared with 10 per cent in the second quarter of 2011.
"Luxury- home sales have fallen 2 per cent since the beginning of the year and I expect high-end prices will fall 5 per cent over 2013," said Thomas Lam, head of research and consultancy for greater China at Knight Frank.
Vincent Cheung Kiu-cho, national director of greater China at valuer Cushman & Wakefield, said sales of luxury flats had fallen a lot since last year. "But so far prices have not dropped significantly as most flat owners are not willing to cut their asking prices."
Cheung expects prices of luxury flats to drop 7 to 10 per cent this year.
Last Friday, developer Wheelock outbid 11 rivals for a site for luxury homes at Ho Man Tin for HK$3.83 billion - at the lower end of market expectations.