Demand for Hong Kong properties continue to climb

Home prices in Hong Kong are escalating despite the government’s attempts to curb the rapid and steep climb.

OneKaiTak1Photo credit: www.onekt.com.hk/

Buying a resale private property from the secondary market has become difficult due to the heavy stamp duties levied by the Hong Kong government on open market homes in an effort to curb rising property prices and a ballooning market. Stamp duties for first-time local buyers are particularly high and the move has slowed down activity in the secondary market considerably. Instead, it has created a demand for new homes in the primary market. Since homes in this market are sold directly by the developers, they are able to adjust home prices according to market demand and requirements, sometimes even offering incentives and discounts.

In the first month of 2016, the demand for new homes fell by 76 per cent. In the same time this year, it rose by 48 per cent. A complete turnaround. With the current lack of interest and activity in the secondary market, developers are  ceasing the current window of opportunity by its neck and adjusting prices according to rising demand. And the demand is high indeed. At China Overseas Land & Investment‘s new residential project situated on the site of the old Hong Kong airport, One Kai Tak, all 188 units were sold out in a single day last month.

OneKaiTak3Buyers may ramp up their buying speed and fervency in the months ahead, as they pre-empt the possibility of the Hong Kong government implementing further curbs on the market, in particular on individuals who sell their properties to purchase new ones.

Consumer confidence in property market improving

Though gradual, the property market seems to be coming out of a long hibernation and there are some bright sparks to make 2017 a warm one.

VIIOThe supply and inventory stock is gradually diminishing, by 8.4 per cent at the end of last year, aided by the restriction in land supply by the government last year, the key word being gradual. Fortunately, the decline in home and rental prices have also been gradual, with no sudden collapse. Last year’s rate of decline of overall private home prices was at a 3-year low, at 3.1 per cent. The 2 years before saw a 3.7 and 4 per cent decline, counting backwards.

QuinterraBy now, consumers and investors are used to the price decline, which has been a regular occurrence since 2013 when the property cooling measures began to kick in. In the current market, any news of slower price declines will be good news, and of stabilisation, even better news. Private home prices have finally landed on a level where an increasing number of buyers find affordable and investment-worthy, which explains the boost in new home sales from 7,440 in 2015 to 7,972 last year.

Properties in the core-central region fared the best in the second half of 2016, while non-landed homes in the city fringe and suburbs registered 2 and 0.6 per cent drops respectively. Landed properties fared unexpectedly well with a 0.8 per cent price increase in Q4. Property analysts are expecting property prices to bottom out this year, which could the year when the property market bottoms out. The authorities do not yet seem to show any signs of easing the property cooling measures, at least not in the first half of the year.

Prices of new homes in China rise once more

Property prices in many major China cities have been on a constant climb since 2011, and new home prices have once again risen last year, at its fastest rate no less.

HuBinDaoWarning signs of a property bubble has been looming for sometime now, and as there has been no signs of relief, the fear is that the market might reach bursting point quite soon. Real estate market speculation threatens to hurt rather than help the economy even as China’s leaders fret over the country’s economic target for the year.

In over 70 cities across China, the average new home prices have risen 12.4 per cent. In top-tier cities such as Shenzhen and Shanghai, property prices have risen as much as 60 per cent in the span of a year. Some cities such as Beijing may have more leeway to cope with further market hikes, but in many cities, property markets are already languishing.

ShuiOnPlazaOut of 15 markets, 12 have shown signs of overheating as prices have began to fall. Growth is beginning to slow down as household loans and house sales have both been on the decline. The China government has implemented some cooling measures over the past year in attempts to slow down the growth of the bubble, the latest being limits placed on the number of new home loans banks are able to issue.

 

Private resale property market to cruise on status quo

2016 proved to be a roller coaster year for the private home market, as prices fluctuated throughout the year but never quite settled into an upward swing. Price increases lasted hardly a quarter before turning the opposite direction and movements differed between regions as well.

SeletarParkResidencesAcross the board, resale private home prices rose 0.1 per cent. Most of the increase were for properties in the prime districts. Prices here rose 1.8 per cent while falling 0.9 per cent and 0.4 per cent in the city fringe and suburban districts respectively. Location continues to rule buyers’ decision-making process and prime district home prices remained stable despite the year-end lack of market activity.

As the rental market continues to wane and competition from completed properties put further pressure on rental prices, more private condominium unit owners may be pushed to sell this year as they come to the end of their 4-year holding period, after which they will have to foot their sellers’ stamp-duty bill. Buyers of resale units could have the upper hand when it comes to negotiations in these cases.

NathanResidencesThe number of private apartment units sold have been falling as well, with 484 units sold as compared to the 618 sold in November. Though the numbers are higher than the 453 units sold in December 2015, it is still a far cry from the 2,050 in April 2010 – a 76.3 per cent fall in fact. Property analysts are expecting prices and sales volume to maintain their current levels, though 2017 could be more a year of keeping the status quo than quick recovery.

Status quo for landed property market this year

Though figures from the last quarter indicated that landed home prices have risen 0.9 per cent, that was following a 2.7 per cent fall in Q3. Property analysts are careful not to yet call it a market rebound as 2017 may pose a difficult year for the economy.

bishopsgateThe landed housing market may continue to feel the pressure this year as cooling measures remain and the economic outlook seems uncertain. In a year-on-year comparison with Q3 of 2013, prices have fallen 14.8 per cent. Overall landed home prices fell 4.4 per cent last year and 4.1 per cent in 2015. The lowered prices could however have been a factor in bringing buyers back. Should sales volume and landed home prices continue to stabilise, the price index may inch up albeit gradually.

There were several considerable transactions in the detached landed house segment and this could have boosted numbers in Q4. One notable sale was for a property in Bishopsgate, at $26.8 million and a couple of others in Holland Park and White House Park at $25.5 million each. Though the Total Debt Servicing Ratio (TDSR) framework implemented in 2013 has limited buyers for private properties across the board, it has more effect on the higher-priced property segments as investors here may have more financial commitments.

whitehouseparkDespite a muted landed housing market last and possibly this year, landed homes remain much sough-after and investors in these segments may be bolder in their attempts to close deals this year.

Will property market bottom out soon?

Hopes of a market rebound may be reignited as the bottom of the cycle seems to be in close reach. While private home prices have fallen by 0.4% for the 13th consecutive quarter, the rate of decline of private home prices have been reduced from the 1.5% in 2016’s Q3.

cairnhillresidencesIn 2016, private home prices fell only 3%, the slowest since 2013. Since the third quarter of 2013, home prices have fallen 11.2%, with a 4% fall in 2014 followed by a 3.75% fall in 2013. The projected fall in home value this year is 2% to 3%. While home seekers and investors may be drawn back into the market with the lowered property prices, analysts are not expecting them to splurge.

highlandresidencesIn Q4 of 2016, non-landed private home prices fell 0.7 per cent, led by city fringe properties with a 2 per cent drop. Prices of units in the core central region remained unchanged while suburban home prices fell 0.3 per cent. Units in the core central region have suffered a 1.9 per cent fall in Q3, thus the fact that sales volume have increased while prices remained unchanged could be a good sign for the year ahead.

Landed property prices posted a surprising rise of 0.9 per cent after a 2.7 per cent fall in Q3 while in the resale HDB flat market, prices fell 0.1 per cent.

Continued decline of private resale condo prices expected

2017 has arrived and the question on every property owner, seeker and investor’s mind may be how the year will fare for them. Will interest rates rise and how will that affect their financial sustainability? Will vacancy rate fall and will there be an increase in resale units hence affecting price competitiveness?

casabellaThe last couple of months of 2016 has shown a continued decrease in resale condo prices. In November, overall resale condominium prices have fallen 0.7 per cent, following a 0.2 per cent in October from September. While central region private non-landed residential properties have regained some favour with foreign buyers, prices have dipped despite a rise in sales volume. Property analysts are expecting a market stagnation at best for 2017 as a quick rebound seems unlikely due to the continued slow economic growth and global political uncertainty.

The increase in sales volume is however a sign of hope for the property sector, as the rate of price decline may cease after a period of increased activity. Most sellers who are listing their units under the current market conditions are more likely than not serious sellers as most investors will try to hold on to their units and tide over the market lull. Thus buyers are increasingly aware of this change in tide and are negotiating for lower prices.

seletar-springsThe segment most affected could be the small suburban condominium apartments as the number of resale units are on the rise and also facing competition from HDB flats. While official figures are yet to be computed, analysts are expecting private property prices to have fallen by approximately 3.5 per cent last year.

Will current property bright spots continue to shine in 2017?

Private home prices have continued to fall in 2016, and while that may have coloured the market atmosphere somewhat grey, bright spots are beginning to shine through the gloom, with 3 sectors performing particularly well this year.

Miro condo on Lincoln Road, just off Novena at the City Fringe districts.

Miro condo on Lincoln Road, just off Novena in the city fringe.

The luxury residential property, commercial office and collective sales segments have all shone this year. And industry players are no doubt hoping that the positive streak will continue in 2017. In this year alone, 3 en bloc sales were closed. Only 1 such transaction was recorded for 2015 and none in 2014. Even for the private home market, sales volume has risen 9.8 per cent this year despite 10.8 and 10.7 per cent fall respectively in sale prices and rents in 12 consecutive quarters.

Some property analysts however consider the fall in property prices a good thing, as this has enticed more buyers back into the market. Buyers who may have previously stayed away from the market due to the increased stamp duties and fees implemented by the authorities in the past few years to attempt to cool the market, have now returned and are now swiftly closing transactions.

2 RVG condo apartment in River Valley

2 RVG condo apartment in River Valley

In the prime districts of 9, 10 and 11, private home transactions were already 42.6 per cent higher than the total in 2015. 2,601 deals were sealed in the Orchard, River Valley, Bukit Timah and Novena areas as of mid-December. With more land allocated under the Government Land Sales (GLS) scheme and developers on the lookout for smaller prime location sites, the market may see a lot more activity quite soon.