Have China's cooling measures helped the average home buyer?

For about 10 months, the Hong Kong government has implemented strict measures to cool down the overheated property market. They did stop property prices from rising further – but did they make it easier for customers to access affordable housing?

Research by a property consultant shows that property prices fell just 3 per cent since the government introduced a new round of housing measures in February.

At a time when many end users in Hong Kong found it difficult to buy flats, mainland buyers and local investors were lured back into the market.

Recent developments such as The Avenue in Wan Chai, The Cullinan in West Kowloon and The Austin atop the Kowloon MTR station attracted them with offers of subsidies on stamp duties. The investors and mainlanders could get a refund on the double stamp duty of up to 8.5 per cent and buyer’s stamp duty of 15 per cent.

Agents estimated that investors made up 70 per cent of the buyers of The Avenue, and 30 per cent of buyers for another new project, The Visionary in Tung Chung.

As the sweeteners helped boost the sales, developers are expected to offer similar benefits for other projects.

However, many Hong Kong customers are unable to buy flats because of tighter mortgage lending. They find it difficult to fork out higher down payments or secure loans from banks. Even if they get a loan, they have to afford double stamp duties, unless they are first-time buyers or have sold their flats already.

Mainlanders and investors, meanwhile, don’t have the same problem. 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 from 5 per cent currently to 10 per cent next year.

Most of them are eyeing some new projects in the city centre. But only 23 per cent of new-housing supply next year will come from Kowloon and Hong Kong Island, likely pushing up competition – and prices.

It is true that the developers are building more small flats, but it doesn’t mean they will be affordable.

Take as an example the second phase of The Avenue. It offers 1,096 flats, 68 per cent of which are studios and one-bedroom apartments between 334 and 535 sq ft. But their minimum price is HK$6.1 million.

For investors, that is a good investment because it is not exorbitant and it would be easier to find tenants for such a prime location. End users who could afford a flat at The Avenue, however, would opt for bigger spaces at the same price range.

In the secondary market, 33,997 private housing lots changed hands in the first 11 months. The annual transaction volume would be far below the 62,934 deals recorded last year.

Despite poor sales, most flat owners are not willing to cut their asking prices. They have strong holding power as the mortgage rates are low and the economy remains strong.

Many people hope that the prices of second-hand homes would drop following the increase in new housing supply and price cuts on new projects. This might happen in the New Territories – but property prices in the city centre will not drop significantly.

Only a rise in interest rates could change the situation.