Hong Kong property

Hong Kong property investors seek to lock-in gains as 20 per cent price drop spurs concerns on outlook

  • Homeowners turn jittery as prices in selected housing estates drops a fifth from recent highs
  • Home prices in Residence Bel-Air have slumped 34.4 per cent since April
PUBLISHED : Wednesday, 12 December, 2018, 8:04am
UPDATED : Wednesday, 12 December, 2018, 2:54pm

Some property investors are rushing to cash out amid fears of a further fall in Hong Kong home prices, a move that could accelerate the correction in selected housing estates.

Values have already plunged more than 20 per cent from recent highs, according to experts.

Examples of the double-digit price decline could be seen in Kingswood Villas in Tin Shui Wai, Park Island in Ma Wan, Residence Bel-Air in Pok Fu Lam and Caribbean Coast in Tung Chung.

“Home prices in Kingswood Villas have declined more than 20 per cent from the peak in July,” said Bryant Man, a sales manager at Ricacorp’s branch at Kingswood Villas.

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Analysts say a toxic combination of rising interest rates, a correction in local stocks, and concerns surrounding the US-China trade war have taken a toll. In addition, lacklustre sales results at recent project launches have further dampened enthusiasm.

Last week, only two sales were recorded among 73 units offered at T-Plus in Tuen Mun. Prices for the micro flats, some measuring 131 square feet, were starting at HK$2.85 million (US$364,600).

Many homeowners seeking to sell their properties stand to make a profit as they have held the units for three years, Man said. Under the existing rules, owners are required to pay a tariff of as much as 20 per cent if they resell flats within 36 months of purchase.

“They would like to lock-in the gain as soon as possible,” said Man. “But monthly transactions have dropped by half to 20 deals from 40 several months ago.”

The biggest drop went to Residence Bel-Air in Pok Fu Lam, which saw prices shoot up to HK$44,496 per sq ft in late April before slumping 34.4 per cent to HK$29,200 per sq ft early this month, according to data from Centaline.

Prices in Kingswood Villas plummeted 21.1 per cent, while Park Island plunged 20.1 per cent and Caribbean Coast dropped 22.9 per cent, said Centaline.

“[Some investors] are in a rush to increase discounts, hoping to unload stock amid an uncertain outlook of the market and a plunge in home prices in the fourth quarter,” said Victor Ng, deputy regional sales manager at Centaline.

This came as Centa-City Leading Index, the home price index compiled by Centaline, dropped a further 0.33 per cent to 176.81 early this month, which means the 10-week slide in home prices deepened to 5.25 per cent.

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Billy Mak, associate professor at the department of finance and decision sciences at Baptist University, said investors would be more sensitive to market change and willing to offer larger discounts to compete for buyers.

“Investors could still make gains even though they offered discounts,” Mak said.

For instance, a flat of 551 sq ft at Kingswood Villas sold for HK$5.35 million, or HK$9,710 per sq ft, in late November. The original owner netted a profit of HK$1.36 million, or 34 per cent above the original purchase price, after holding the property for only three years, said Centaline.

Analysts said home sellers from these estates faced keen competition from major developers who offer an array of sweeteners, financial aid and long completion dates to woo buyers.

“Developers would offer discounts and mortgage plans of higher loan-to-value ratios to buyers of new flats,” said Patrick Chau, senior director of residential development and investment at Savills.

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The high supply of homes in the housing estates, along with supply from neighbouring properties, means keener competition for buyers and larger price cuts.

“Homes in the mass market can only be sold at larger price discounts with such keen competition,” Chau said.