Hong Kong builders will put the brakes on home sales for the rest of the year after government curbs to rein in prices sapped demand, according to Bocom International Holdings Co. and Centaline Property Agency Ltd.
Builders including Sun Hung Kai Properties Ltd. (16) and Cheung Kong Holdings Ltd. (1) sold about 4,320 new units for HK$40 billion ($5.2 billion) in the first half, both the lowest since the second half of 2008, according to figures compiled by realtor Centaline. A total of 7,183 units were sold for HK$66 billion in the second half of 2012, Centaline said.
Sun Hung Kai Properties Ltd.'s Imperial Cullinan residential development, second and third buildings from right, stand in West Kowloon, Hong Kong. Photographer: Jerome Favre/Bloomberg
Developers are holding off sales after property transactions in the city plunged to a two-decade low in the second quarter in response to a doubling of stamp duties on buyers and sellers, and tightened regulations on marketing material of new apartments. Home prices have dropped 2 percent from a historic high in March, after having more than doubled since early 2009.
“The pace of sales will remain slow unless there’s something encouraging developers to turn over assets faster,” Alfred Lau, Hong Kong-based analyst at Bocom International, said by telephone. They have “little incentive to sell at a time when the market’s down.”
Hong Kong Chief Executive Leung Chun-ying, in February, doubled the stamp duty on properties costing more than HK$2 million and targeted commercial real estate. Since taking office a year ago, he also has imposed taxes on non-resident homebuyers and pledged to increase housing supply to bring prices down to more affordable levels.
Concerns that more curbs will be introduced and expectations that interest rates will begin rising may send home prices down as much as 10 percent in the second half, according to Midland Holdings Ltd. (1200), Hong Kong’s only listed real estate agency. Total property transactions in the second quarter fell 42 percent from the previous quarter to 14,291, the lowest since at least 1991, when Midland began keeping quarterly records.
The government won’t ease the curbs until there’s a steady supply of new properties, Leung said in an interview with Bloomberg News in June. Financial Secretary John Tsang said the city may introduce more curbs if needed, the Hong Kong Economic Journal reported July 2.
“The government measures are stifling new apartment sales,” Wong Leung-sing, associate director of research at Centaline, said. “Developers are very cautious, and at the same time many of them are unwilling to cut prices to boost sales.”
No transaction was posted on the website of Ocean One, a 35-story apartment project in Yau Tong in the city’s east, since developer Lai Sun Development (488) Co. on July 2 put 52 units up for sale at prices starting from HK$6.87 million.
The government in April introduced new rules aimed at making new apartment sales more transparent. They include requiring developers to update sales records more regularly and to list properties by apartment size excluding shared space.
“Developers will need time to get used to the new rules,” Hong Kong-based Buggle Lau, chief analyst at Midland, said. “They may bring the pace of sales slightly up in the second half, but we probably won’t see things back to the way it once was.”
The government needs to lower premiums charged either on farmland bought by developers with the aim of converting it to residential use, or on projects sold atop railway stations, to encourage developers to accelerate sales, said Bocom’s Lau.
Leung has sped up approval of developers’ home sales applications to make more new units available to buyers, while also allowing developers to begin selling apartments sooner before construction is scheduled for completion.
Hong Kong’s home prices have more than doubled since early 2009 on near record-low interest rates, a lack of new housing supply and an influx of mainland Chinese buyers.
“All the measures to curb activities are negating whatever the government’s trying to do to accelerate sales,” Centaline’s Wong said. “They’ll need to figure out a different way.”