Hong Kong home prices to fall in the second half as demand softens

Hong Kong home prices will drop in the second half of the year as buying demand softens, according to property consultants Colliers International.

Vincent Cheung, the firm’s deputy managing director of valuation and advisory services in Asia said purchasing power in the housing market had been very much consumed and flat demand would soften.

“There will not be much stress to property prices if the number of flats launched do not exceed 20,000. A healthy 5-per cent adjustment in the second half of the year would be a good time for self-use buyers to enter the market,” he said.

“Home size will continue to shrink due to home price and leverage constraint at the banks.”

Colliers expected property prices to grow by 10 per cent in 2017, based on the ample monetary liquidity, negative real interest rates, a supply shortage and active investment demand.

It said land sale prices would continue to grow but at a slower pace as potential buyers and sellers are searching for a new market equilibrium.

Hong Kong new flat sales exceed 10,000, highest six-month figure since 2005

In addition, Citibank predicted that home prices would fall by 20 per cent in the second half of the year, said Catherine Cheung, head of portfolio advisory, Citibank global consumer banking.

“The Hong Kong Monetary Authority announced in May three new tactics for cooling the property market,” said Cheung. “Coupled with the new primary supply of close to 24,000 units (ready for sale) in the second half of the year, property prices in the second half of the year will be under pressure, down 20 per cent.”

Cheung said the measures increased banks’ capital cost in approving new mortgages, possibly pushing mortgage rates up.

“I predict that property prices will fall by 15 per cent in 2017, which means property prices will fall for 20 per cent for the rest of the year.”

On the broader property market, Colliers’ director of research Daniel Shih said while price levels were very high and the market would slow down, activities in retail and hotel had been picking up.

“Mega deals will depend on mainland investments which have been affected by capital outflows.”

Separately, Tang Shing-bor, dubbed as king of retail shops, said he had agreed to buy the residential development in Tuen Mun, TPlus for HK$1.2 billion from Chun Wo Property Development, now renamed as Asia Allied Infrastructure Holdings.

Units at TPlus, the smallest in Hong Kong ranging from 128 square feet to 250 sq ft, are due to be completed in September 2018.

The smallest unit is even smaller than each of the 52 134-sq ft parking spaces in the complex.

Chun Wo won the site for HK$230 million, or HK$1,530 per sq ft in May 2014.

Tang Yiu-sing, the son of Tang Shing-bor, said he planned to retain the project for leasing rather than sale.

He said the monthly rent for a sub-divided flat was about HK$6,000 in the urban area.

“The smallest unit can achieve HK$4,000 per month at TPlus,” he said.