Residential Property Sales in Hong Kong Fell Last Month

In December last year, residential sales in Hong Kong fell to their lowest figure since November 2008. Sales fell by 10.3% month on month to just 4,301, and this is thought to be due to a combination of factors including many people travelling abroad over the Christmas holidays and uncertainty over the global economy.

The luxury sector fared worst of all with sales falling 32.9% to 466. Total sales of residential units last year fell by 40% year-on-year to just 84,462. However sales of new property fared a little better with developers choosing to price their properties competitively, and individual projects received good responses.

Sales of existing property haven't fared so well, and owners have had to become more flexible over pricing. Owners are being forced to take reductions of around 15% below market value in order to secure a sale within a reasonable time period.

The rental market was definitely affected by the holidays with landlords choosing to lower rents to secure tenants rather than leave property empty, and as a result of this, luxury rental values decreased by 2.5% month on month.

Experts think that the current slow progress over a solution to the European sovereign debt crisis will continue to hinder residential sales.

Sales and rental values for luxury property are expected to fall during the year. Many international companies in Hong Kong are affected by events in Europe and the US, and will be looking to cut accommodation costs for employees, and will also be looking to cut rental costs of offices. Last month saw many companies choosing to move to less expensive locations in order to cut operating costs.

Hong Kong's Property Market Predicted to Remain Slow This Year

Recent figures from one of Hong Kong's largest real estate agencies, Centaline show property transactions hit a five-year low totalling just 108,814 properties which is 33% less than a year earlier.

This is the lowest number of transactions since 2006 when a total of 99,087 deals were recorded. Last year the Hong Kong government imposed higher stamp duty levels, increased taxes and auctioned off land in order to boost supply and regain some control over prices, as the city is regarded as having one of the world's most expensive housing markets.

The government imposed these measures in order to curb speculators from profiting, but now experts think they are hurting the housing market. Not least because mortgage rates are rising and the global economy remains weak.

At the moment prices have only fallen by around 5% since their peak in June 2011. The fall is mainly due to owners being reluctant to sell and transactions are set to remain low in 2012. In December 2011 just 4,301 units were sold which is a reduction of 54% compared to December 2010.

Analysts think prices will largely remain flat, but could fall by around 5% to 10% this year if the Eurozone crisis worsens and government controls remain in place.

Over the last couple of years property prices in Hong Kong have increased dramatically due to a combination of wealthy buyers from mainland China and low interest rates, leaving many ordinary buyers unable to afford inflated prices. This is a situation which unsurprisingly hasn't sat well with many of the city's 7 million residents.

Hong Kong Property Market Sees Weaker Sentiment Last Month

The Hong Kong property market was a little weaker last month due to continuing problems in the Eurozone and in the global economy. In October potential homebuyers proved reluctant to commit to purchasing flats, and tighter lending conditions continue to make it more difficult to obtain mortgages.

These conditions resulted in home sales falling by 3.7% last month to reach their lowest level since February 2009. The luxury end of the market saw sales fall more steeply, as just 268 luxury homes worth more than HK$10 million were sold, a fall of 15.2% month on month.

Sellers also became more willing to listen to offers, with property being sold for an average of 10% less than the asking price. Prices of mass residential property fell by around 2% in October, but prices of luxury homes fell by just 0.5% as only homeowners short of cash were willing to sell at a discount.

Newly launched projects were received relatively well, as one developer saw 40 units sold within the first three hours of the launch.

The rental market was relatively quiet as this is the low season, and landlords were willing to negotiate on rents, with luxury rents falling by 1.9% compared to September.

Experts think the outlook for the Hong Kong property market will depend on the global economy, and the effects of the Eurozone prices have already begun to be felt as exports declined by 3% year-on-year in September, for the first time in two years. However they are predicting that any price corrections will be minimal unless the sovereign debt crisis in Europe worsens considerably.

Increasing Numbers of Hong Kong Homeowners Are Falling into Negative Equity

Increasing numbers of Hong Kong homeowners are falling into negative equity, with the estimated number of mortgages underwater rising to 1,653 at the end of the third quarter compared to just 48 three months earlier, with loans worth $528 million.

This increase provides clear evidence that prices in Hong Kong are declining, and experts expect them to fall even further, especially with the risk of a global economic slowdown. The number of home transactions has fallen for 9 straight months, and prices declined by 3% between June and August. There are grim predictions that property prices may fall by as much as 30% by 2013, and the number of loans in negative equity is now at its highest level since the second quarter of 2009. However it's nowhere near as bad as the peak of 106,000 which was reached at the end of June 2003 at the end of the six-year slump which saw property prices decline by up to two thirds.

During the past year the government has implemented a number of cooling measures in response to the public outcry over price increases of up to 70% since early 2009. It has raised the minimum deposit required on some mortgage loans and has increased land sales in an effort to ease the shortage of new apartments which has partially been caused by an increase in buyers from other parts of China. Mortgage rates have also increased five times since March. While falling into negative equity is obviously bad news for these homeowners, it is good news for others who may find property prices finally becoming within reach.

Chinese and Taiwanese Seek Japanese Bargains

One of the biggest property brokerage firms in Taiwan is helping Taiwanese and Chinese buyers find property investments in Japan, as the government restrictions are making it increasingly difficult to buy in their home markets. Japan is proving attractive due to low interest rates, and the high rental yields can be double those available in their home countries.

Property prices in Japan are currently low, while the Chinese and Taiwanese governments are currently trying to suppress property prices are due to their rapid increase over the last couple of years. China has already raised interest rates five times since October, has limited property purchases in Beijing and Shanghai and is now looking towards curbing the growth of property prices in smaller cities.

Taiwan has increased the cost of borrowing for five straight quarters, and has also introduced a new tax on luxury properties sold within two years of purchase. It's been estimated that this action will lower transaction volumes by 10% this year as the market is no longer so attractive to speculators.

The property market in Japan is already showing signs of recovery after the recent earthquake and tsunami. New housing starts increased by 6.4% in May compared to a year earlier, and a $25.5 billion disaster package has just been approved for rebuilding after the earthquake. Rental yields in the country are around 5% to 6%, which is double that of China or Taiwan, as property prices here haven't increased as substantially as other Asian markets. Chinese investors in particular are increasingly looking for other markets, as they prefer to relocate assets offshore.

Residential property market in Hong Kong remains strong

According to a report from Jones Lang LaSalle, the property market in Hong Kong remains strong in spite of a slowdown in sales volume. The report points towards low interest rates, limited space availability, corporate expansion and strong consumption as the reason for this continued growth.

The Hong Kong government imposed cooling measures over the last year, and this led to an initial slowdown in sales growth during the first six months of 2011. There were a total of 55,200 sales and purchase agreements during the last six months, and this is 16% less than the previous year, but with the number of transactions averaging 9,200 per month, this level is still considered to be healthy.

There were 1,260 transactions for property valued at HK$20 million or more, during the first six months of this year, and although this is 33% less than the last six months of 2010, it is still 7% more when measured on a year on year basis.

The total of these transactions was HK$59.4 billion which is 20% less than the second half of 2010 but 11% more year-on-year. In fact the capital values of luxury property has increased by 16.2% this year, and rents have gone up by 4.9% which is mainly due to demand from corporate expatriates.

The overall price of residential properties has increased by 10.1% this year, and this increase is mainly due to higher household incomes and a lack of available housing. Sales of new properties have slowed as just 4,700 new units were sold between January and May, while 13,600 units were sold during the previous 12 months. Experts expect sales volumes to remain low for this year, but don't see any real market risks.

Chinese government is successful at avoiding property bubble

It looks as if the Chinese government has been successful at avoiding a property bubble as prices during May fell in 23 out of the 70 cities surveyed, up from 16 in April.

Prices of existing homes in Beijing fell by 0.2% from April while property in Shanghai registered a 0.2% increase. Prices of new homes increased in 67 out of the 70 cities. The Chinese authorities are determined to prevent a bubble, and on June 14 the authorities ordered banks to hold more money as reserves, as it continues to fight inflation.

The government measures work better on existing homes as they restrain purchasing power, whereas developers of new properties are in no rush to slash prices, and are watching to see how government policies will develop.

The prices of new homes in the larger cities such as Beijing slowed last month, as much of the government's efforts have been focused on the largest urban areas. However a total of 29 cities posted increases of more than 5%, even though this is down from 33 cities in April.

Prices of new homes in Beijing have increased by 2.1% while Shanghai homes increased by 1.4%. The smaller cities such as Lanzhou, Mudanjiang and Urumqi all posted much larger gains of at least 7.7%.

Standard & Poor cut Chinese developers outlook from stable to negative on June 15, and it's likely that property sales will slow as the government policies really start to kick in. The credit rating company thinks that as prices may be 10% lower in the next 12 months.

Investors Eye up Singaporean Industrial Property

Industrial property in Singapore has been forecast to outperform residential, office and retail property over the next few years. Cushman and Wakefield reported that capital values for industrial properties increased by up to 22% in 2010, and the vice-chairman, Donald Han, expects a healthy 15% increase this year. He feels that as long as the economy and manufacturing sector continues to expand the market could enjoy another two years of steady capital values and rental increase.

Demand for industrial property has increased due to the government cooling measures which have forced speculators to move from expensive residential property to the more affordable industrial properties.

Industrial property is currently costing around US$240-US$280 per square foot which means a reasonably sized unit of 1000 to 1500 ft.² would cost less than US$400,000. This compares very favourably with the cost of residential property as this amount would not buy much more than a shoebox.

Although prices of residential property rose sharply last year, analysts are currently hedging their bets about which way the market is heading as the government measures begin to take full effect. Most agree that prices cannot keep on rising so steeply, even though the most recent data shows that prices are still below pre-global financial crisis levels.

The prices of residential property rose by 2.1% during the first quarter of this year which is slightly down from the 2.7% growth recorded in the last quarter of 2010. Prices have now increased for seven straight quarters, although the number of sales is slowing.

Aftermath of the Earthquake leads to building boom in Japan

The aftermath of the earthquake is likely to lead to the biggest housing boom in Japan for at least 15 years. Japan's second-largest house builder, Sekisui House Ltd is set to focus its attention on building new homes locally after concentrating much of its efforts into overseas housing markets such as Australia and China over the last three years.

The company had decided to target countries that are dealing with increasing population, good economic growth and rich resources as the housing market in Japan was damaged by falling wages and increasing unemployment.

New housing starts in Japan fell to less than 1 million units in 2009 and 2010 which is the lowest level for four decades, but now demand is expected to exceed that of 1996 when 1.6 million new homes were built after the Great Hanshin Earthquake.

The Japanese Prime Minister is proposing a ¥4 trillion budget to help rebuild homes destroyed and damaged by the earthquake and subsequent tsunami. There is also a proposal that the government should raise taxes to pay for this extra spending, but experts feel this would hurt the economy and could jeopardise the revival plan.

After the last earthquake in 1996 housing starts increased for 10 months, but the area damaged in March is much larger and the need is much greater. There are about 30.3 million homes in Japan, and 90% have not yet been assessed for quake resistance. An estimated 0.4% of the 29,692 homes built by Sekisui in the area of the Hanshin earthquake were destroyed and 9.3% were just slightly damaged.

The chief executive officer of Sekisui, Isami Wada announced the company's intention to continue building more earthquake resistant homes that help give people peace of mind and security.

Confidence remains high in Hong Kong property

The first land auction since last November has just taken place in Hong Kong and raised amounts close to the highest estimates of analysts. This indicates that developers are still confident that the market can withstand any attempts by the government to control property prices.

A plot of land in the Hung Hom district which is near to the site of the former airport was bought by Nan Fung Development Ltd and Wing Tai Properties Ltd for HK$1.525 billion. Five surveyors and analysts had estimated this site would raise anything from HK$1.07 billion to HK$1.53 billion.

The site will be jointly developed and it's estimated the whole project will cost between HK$500 million and HK$600 million to build over 100 three and four-bedroom luxury apartments. The price paid for the site equates to HK$9934 a square foot while the estimated selling price will be HK$12,934 per square foot.

Property prices in Hong Kong have risen by 65% in the past two years, and the government has been trying to control this rapid rise since last year and hopes that boosting land supply will lead to more affordable housing, since many of the public have complained that housing costs are now unaffordable. Property prices rose 0.6% to the week ending April 17 after a 1.6% decline in mid-March after mortgage terms increased.

Prices of homes have increased by around 10% since last November. The government is selling a total of nine sites in the second quarter of this year which will enable 2650 apartments to be built. It could auction 52 sites this year which would mean 16,000 homes could be built. This would be an increase of nearly 80% on the number of homes built on government sold land last year.

Asia Leading Growth in Property Investment and Development

At the recent fifth annual City Development Meeting in HCM city, Lim Lam Yuan, President of Singapore’s Institute of Surveyors and Valuers stated that the Asia Pacific region is currently the leading area in global property market recovery since the global financial crisis.

Additionally, Yuan added that this region is seeing more and more wealthy men and women connect with this region and desire prime property for investments as well as lifestyle reasons.

Due to being the world’s most populous region, as well as a continued influx of people, Asia is emerging as an attractive destination for property developers. The continued increase in population, as well as plentiful economic resources and low costs has made this region superior in comparison with other nations in Europe or the United States.

China’s property market has been growing rapidly with sales totals reaching over 4.7 trillion yuan last year. This number is much larger that 2009’s total of 4.3 trillion yuan. Interest rates were as low as 0.36 percent. The rental market has seen some progression as well, with rentals for private residential properties experiencing a 17.9 percent increase.

India’s property market is doing quite well also. Due to excellent infrastructure, a well-polished legal system, and a high number of doctors and engineers, India is a prime location for investment opportunities.

India has been experiencing more investments in its country, with increased residential development, new construction and new town planning, mall development, and hospitality and office/industrial space development and management.