Hong Kong property sales slump to 19-month low for October - and worse is yet to come, say analysts

Property sales in Hong Kong slumped to a 19-month low in October, and analysts predict the worst is yet to come. The government, meanwhile, said it would continue to increase land supply.

The slump in total sales volume accelerated last month, with sales down 43.63 per cent year on year, compared with September's drop of 31.6 per cent.

"It is the worst October result since we started recording data in 1991," said Buggle Lau, chief analyst at agent Midland Realty.

Overall transactions in October fell 17.85 per cent from the previous month to 4,491, following a modest recovery in September, the Land Registry said. In September, total property transactions rose 5.2 per cent month on month to 5,467.

Chief Executive Leung Chun-ying yesterday said he would continue to increase land supply for residential flats and maintain restrictive measures on overseas buyers.

Speaking before an Executive Council meeting, Leung said government efforts to increase land supply had started to bear fruit, with an 11-year high supply of new private flats expected for the coming three to four years.

The Transport and Housing Bureau said that new flats to be completed up to 2019 would amount to 86,000. This was a record high from September 2004 when the bureau began releasing related figures, Leung said.

"We have put more land into the market through changing land use ... our efforts have started to have an effect," he said.

Last month residential transactions fell 22.6 per cent to 3,300, from September's 4,263, as the take-up rate in primary launches weakened while sales activity in the secondary market was painfully quiet. The total sales value of residential deals fell 32.81 per cent month on month to HK$22.52 billion.

"There were 2,035 transactions recorded in the secondary market," said Derek Chan, head of research at agent Ricacorp Properties. "The situation was even worse than … when Hong Kong was hit by the severe acute respiratory syndrome [Sars] outbreak in 2003."

Chan said monthly transactions in the secondary market averaged 3,478 in 2003, with the lowest number - 2,505 deals - seen in February of that year. He expected the market would be clouded by cautious sentiment, with total sales volume likely to hit the 3,800 level when the Land Registry announces the November figure.

As there is usually a lag between a transaction and its registration, the October figures reflect the market in September to early October.

Lau said sales of new homes dropped 12 per cent month on month in October to 1,409 units, down from September's 1,602.

An increasing number of analysts are predicting Hong Kong home prices will start to fall next year, with some expecting a decline of 30 per cent by 2017 as interest rates rise, supply increases and the economy deteriorates.

According to investment bank Barclays, home prices are now down 2.7 per cent compared to their mid-September peak.

"Should home prices continue to fall in the coming weeks, this could tip the home owners' and home buyers' sentiment mindset into bearish territory and potentially speed up the pace of the physical market's correction," it said in its latest research report.