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.

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.

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.