Hong Kong home buyers head for the sidelines as more residential property come to market

Just one per cent of Hongkongers considered it a good time to buy property in the second quarter of this year, according to a latest Citibank survey.

Lawrence Lam, head of retail banking of Citibank Global Consumer Banking, said a “wait-and-see” attitude has firmly set in when it comes to buying real estate in the city.

Based on opinions collected by The University of Hong Kong, a resounding 79 per cent of the 500 respondents thought the second quarter of this year was a bad time to buy – a record high for the quarterly survey since 2010.

The percentage of respondents interested in property investment, meanwhile, dropped to 14 per cent in the quarter, ending a three-quarter rally.

The survey also showed the government’s cooling measures could have changed Hongkongers’ opinions, too, on future trends in property prices.

Thirteen per cent of respondents now think property prices will drop in the next 12 months up from 9 per cent in the second quarter last year, ending a four-quarter consecutive slide.

But 57 per cent of interviewees still expect home prices to rise.

When it comes to developers, more focused their attention on selling smaller flats in single blocks in the second half.

A prime example is “Novi”, a project developed by Lai Sun Group in Mongkok, which released its price list on Tuesday. It features 138, one-room flats, with saleable areas between 157 and 312 square feet . They start at HK2.8 million (US$358,000).

Poon Yui-man, the group’s senior vice president, said that its show flats will now open in two weeks, with 50 units earmarked for the first release.

At the other end of the market, meanwhile, Victoria Harbour in North Point and St Barths in Ma On Shan in the New Territories – both being launched by Sun Hung Kai Properties – have just received permits to sell by the government.

According to Lands Department figures, in June there were 9,022 units still pending pre-sale consent, and it expects more notable developments likely to be launched in the second quarter of the year, with expected completions in 2019.

These include 1,188 units from Sun Hung Kai Properties’ “Cullinan West” phase three in Cheung Sha Wan, 953 units from Chinachem and MTRC’s “Parc City” development in Tsuen Wan, 2,172 units from Sun Hung Kai Properties’ Phase IVA & IVB of “Lohas Park” in Tseung Kwan O, and 648 units from Wheelock’s “Muk Ning Street” project in Kai Tak.

Wong Leung-sing, associate director of research at Centaline Property Agency expects unsold new housing inventories to be standing at 10,000 in second half of this year.

In the second quarter, 9,003 new flats remained unsold, a 1.3 per cent rise on the first quarter, according to Centaline’s study on 212 new projects currently for sale.

“Inventories are still at a healthy level,” he said. “The increase is mainly because of developers accelerating the marketing of their project launches,” he said. There were 79,623 new flats available for pre-sale on the market in second quarter of the year, a rise of 3,846 from the first quarter.

He said New World Development still had 491 unsold units, and Cheung Kong Properties 326 flats unsold.

Ingrid Cheh, associate director of research at JLL, was hopeful the inventory backlog at recent launches will potentially be absorbed.

“The market has been able to absorb an average of 16,800 primary units per year over the last three years, based on primary home sales figures from 2014 to 2016,” she said.

“In the first half of 2017, the market was already able to absorb 9,818 units, which is 38 per cent higher than the average recorded for the first six months of the previous three years.”

JLL also said that based on those 2014-2016 figures, there were more transactions in the second half generally than in the first.

Should buying momentum be sustained into the second half, the market could potentially see another 10,000 units absorbed, despite the backlog of inventory, JLL said, as developers remain eager to launch more new projects, given the gradually expanding supply pipeline and sentiment still remaining largely upbeat, despite the record price levels.

As such, JLL still expects residential prices to maintain their upward trajectory, though growth is likely to be more moderate in the second half, likely at around 5 per cent, compared with the 10.5 per cent growth recorded throughout the first half.