New flat launches and discounting push prices down in Hong Kong

Hong Kong property prices appear to be on the retreat, weighed down by an increase in supply from new primary launches and discounting of asking prices in the secondary market by flat owners eager to sell before the downward cycle gains momentum.

A year after the government launched successive measures to cool the market, home prices are heading down, as indicated by the Centa-City Leading Index, which tracked a 0.6 per cent week-on-week decline last week to bring the total decline in the Index level down 1.4 per cent since the beginning of the year, to 117.41.

The index tracks secondary market home prices at 100 housing estates and, compared to a peak reading of 123.66 in mid-March last year, is now down by 5.1 per cent.

Analysts expect prices will continue to fall, retreating by as much as 10 per cent for the year, reflecting the lingering impact of austerity measures and the surge in supply of new homes. Among the new launches are Cheung Kong's 1,648-flat The Hemera in Tseung Kwan O (Ph IIIA of Lohas Park); the 1,071-flat Mont Vest in Tai Po; and the 402-flat Kwelin Street project in Sham Shui Po.

"Home prices will edge down, rather than collapse," said Joyce Kwock, a property analyst at Credit Suisse.

Barclays predicted that prices could fall by at least 30 per cent by the end of next year. But Kwock said the market was resilient and would be supported by increasing household income and a buoyant employment outlook. Also, there was no imminent reason for a rise in mortgage rates.