Heading for a bear market? Hong Kong home prices tipped to dip further as supply of private flats on the up

As the government accelerates land sales, supply trend will likely put house prices under pressure as buyer demand slowly catches up

PUBLISHED : Saturday, 31 October, 2015, 2:47am
UPDATED : Saturday, 31 October, 2015, 10:46am

The city's supply of private homes is projected to reach 86,000 flats in the coming three to four years as the government accelerates land sales, according to government data.

Analysts said the supply trend, which represents a record in private homebuilding, is likely to put house prices under pressure as buyer demand slowly catches up.

"We saw positive buying results when developers launched new developments for sale in the past few months. But sentiment will turn around quickly if the city's economy is proven to slow," said Wong Leung-sing, the head of research at Centaline Property Agency.

The Transport and Housing Bureau announced the figures in a report on new private housing supply for the third quarter. The estimate is an upward revision of 3,000 flats from the bureau's previous quarterly report.

Meanwhile, pre-sale agreements during July to September reached 10,000 units as developers rushed to put new properties on the market. This was up from 9,000 in the previous quarter.

New mortgage loans in September totalled HK$20.3 billion, a drop of 13.4 per cent compared with August, Hong Kong Monetary Authority data showed.

"Buying demand is not bad this year," said Wong, adding home prices were likely to come under pressure next year.

"If the number of units sold by presale drops for three consecutive months, it indicates Hong Kong is heading for a bear market," Wong said.

The latest Centa-City Leading Index, a housing price measure compiled by Centaline, showed prices easing slightly from the previous week. The index eased 0.10 per cent to 142.98 as of October 25. Since the start of the year, the index is up 9 per cent.

Hong Kong trails London as the city most at risk of a property bubble, according to the latest report by investment bank UBS released on Wednesday. The bank cited data showing that prices have risen 200 per cent since 2003.

UBS forecasts home prices in Hong Kong to decline by more than 10 per cent by the end of 2017. Earlier this month, investment bank CLSA forecast prices would fall 17 per cent over the next 27 months.

Derek Chan, the head of research at Ricacorp Properties, also expects property prices to ease in the next few years as supply rises.

"Prices will gradually fall starting next year," Chan said.

The housing bureau's projection of 86,000 homes includes 65,000 units being built but excludes those pre-sold by developers.

Meanwhile, the number of flats being built in the first three quarters of the year totalled 7,900, down 49.7 per cent against all of last year. Private homes during the third quarter totalled 3,500 units, down 40.6 per cent from the previous quarter.