Property transactions down to a trickle after Hong Kong government takes steps to tackle housing crisis
Hong Kong’s red hot property market is taking a breather as potential buyers held back their purchases hoping for a price correction after the government announced a slew of measures to ease the housing crisis by increasing the supply of affordable housing.
Agents reported that sales of small- to medium-sized homes on the secondary market dropped by a third over the weekend.
“Homes costing below HK$5 million will be directly hit by the latest housing measures as this group of buyers will turn to cheaper subsidised housing,” said Louis Chan Wing-kit, vice-chairman and CEO of residential sales for Asia-Pacific at Centaline Property Agency.
He added that transactions also fell because owners were unwilling to lower asking prices as they are yet to digest the impact of the government’s measures.
Chief Executive Carrie Lam Cheng Yuet-ngor’s announcement on June 29 that flats under the subsidised Home Ownership Scheme (HOS) would be nearly 50 per cent cheaper than private flats, instead of the current 30 per cent discount, would create direct competition with small-sized flats in the private housing market, Chan said.
Under the HOS scheme, the monthly income limit for family applicants will be HK$57,000, and HK$28,500 for eligible individuals.
Bryan Chu, sales manager at Tuen Mun’s Hong Lai Garden branch of Ricacorp Properties, said no transactions were closed on the weekend.
Before the new housing measures, he said there would be between five to six transactions per week at Hong Lai Garden.
“Both potential buyers and sellers are taking a wait-and-see attitude to assess the effect of the new housing policies,” Chu said.
Reforming the pricing system for subsidised flats was one of the six measures Lam announced to tackle the city’s long-running housing problems.
Other proposals included imposing a vacancy tax equivalent to two years’ rental income on empty new flats, reallocating nine government sites originally earmarked for private housing to build 10,600 public flats, inviting the Urban Renewal Authority to build starter homes at Ma Tau Wai and imposing more stringent conditions on developers’ sales of uncompleted flats.
“Buyers may return to the market one or two weeks later, after more details are released by the government,” said Chu.
Some sellers, however, are lowering their asking prices slightly in a bid to speed up sales.
“About 20 per cent to 30 per cent of our sellers have dropped their asking prices by one to two per cent after the announcement of the government measures,” said Roy Wu Chi-wai, sales director at Many Wells Property Agent.
For instance, a 309 square feet flat at Goodview Garden in Tuen Mun was being offered for HK$4.8 million but the owner has lowered the price by HK$140,000 to HK$4.66 million after the new housing measures were released last week.
“The market will be quiet for some time,” he said.
As the prices of private flats have surged to record highs, it has had a spillover effect on the government subsidised HOS secondary market in the past 12 months, Wu said.
“The entry level for a 400 sq ft lived-in HOS flat in Tuen Mun is HK$4.58 million now. It has increased by HK$230,000 within a month although these flats are 24 years old and without any amenities,” he said.
He said the prices of the HOS flats, where the 30 per cent land premium is yet to be paid to the government, has jumped 19 per cent since January, faster than the 12 per cent for private flats.
Vincent Cheung Kiu-cho, deputy managing director for Asia valuation and advisory services at Colliers International, said prices for second-hand HOS flats were more expensive than private flats considering the quality of government subsidised housing.
At present, the supply of cheaper subsidised housing has still not expanded in a big way and therefore its impact on the housing market was limited.
“If the government continues releasing more sites for public housing, it will definitely affect the tiny flats sector,” he said.