Home prices in Hong Kong 'could fall 30pc by end of 2015'

The consultancy says a downward trend is already in place because of government policies

PUBLISHED : Tuesday, 29 April, 2014, 3:11pm
UPDATED : Wednesday, 30 April, 2014, 1:19pm

Hong Kong home prices could fall as much as 30 per cent in the next two years, according to Joseph Tsang, managing director of property consultancy JLL's office in the city.

His view echoed bearish forecasts from investment banks such as Barclays, which recently predicted a fall of at least 30 per cent by the end of next year.

Tsang expects a 10- to 15 per cent decline this year and another 10- to 15 per cent drop next year.

"In the face of the government's policies, the downward trend is confirmed," he said.

Hong Kong’s government has been working to cool runaway property prices for years, implementing a 15 per cent stamp duty on foreign buyers in 2012 and making more land available for development.

Tsang expressed concern about the government's plan to increase land supply.

Under the 2013/14 land sale programme, the government has already sold or will sell 36 residential sites, which are expected to provide about 13,700 units.

"We expect most of the units to be completed in 2017/18, with a few projects maybe completed in 2019, but the units will be put on the market in the next two to three years," Tsang said.

Barclays in October also predicted a correction of at least 30 per cent over the next two years, citing a stall in household income growth, a plateau in the amount people would be able to pay in rent, and an excess of supply as more housing units become available.

The bank was wrong once before, predicting in 2011 that property prices would fall 30 per cent over two years. Instead, they rose 24 per cent. The bank cited a 111 per cent climb from 2008 to late 2013.

But analysts including Tsang say we’re in for a fall for real this time.

The flood of flats coming on to the market at the same time could push home prices down rapidly, he warned.

Of the 36 residential sites, 27 sites have been awarded thus far, and one site in Tai Po was withdrawn from tendering because the bids failed to meet the government's reserve price.

Tsang said the weakening market, plagued by government policies including heavy stamp duties, has dampened investment activity in the city. The volume of commercial investment last year fell 35 per cent from 2012 to US$7.3 billion, JLL said.

Tsang said income rose at its other businesses, such as property valuation, property management and commercial leasing.

But when the market is weak, he said, the firm will focus on management to enhance the assets' value. JLL manages 50 million square feet of commercial space in Hong Kong, Tsang said.

JLL's worldwide gross revenue was US$4.5 billion, of which 6 per cent came from "Greater China, including Hong Kong", according to the firm's annual report. This compared with the group's gross revenue of US$3.9 billion in 2012, when China also contributed about 6 per cent.

In this week's C-Suite interview, Joseph Tsang shares more of his views on the outlook for the city's property market. He also tells how JLL is trying to enhance its revenues as the housing market slows