The recent withdrawals of government land sales as a result of poor bids and the return of negative-equity homeowners are adding to strains in a rapidly weakening Hong Kong property market, with analysts saying developers will be forced to cut prices aggressively to stay afloat.
Centaline Property Agency estimates total property transactions in Hong Kong in January was on track to register its worst month since 1991, when it started compiling monthly figures.
Total transactions are likely to have hit 3,000, it said in a survey released on Sunday. With developers slowing down new launches, only 394 units were sold in the first 27 days of January, 80.3 per cent lower than the 2,127 deals lodged in December. Meanwhile, sales of used homes fell by a fifth to 1,276 deals in January.
The government will announce the official data in the coming days.
A similar picture emerges from another survey by Ricacorp Properties, which shows 2,908 deals were lodged with the Land Registry in the first 28 days of January.
Analysts said developers slowed down new launches after the US implemented its first interest rate in a decade. Hong Kong commercial banks are expected to follow suit in the coming months, pulling up mortgage rates.
“Developers have to offer very attractive prices if they want to find buyers for their flats,” said Derek Chan, head of research at Ricacorp, adding that developers might even have to offer units at prices below the secondary market.
Owners of existing homes have cut prices by more than 10 per cent around Hong Kong. Home prices – after a 12-year upcycle – fell 10 per cent from their peak in September. Some analysts expect prices to fall more than 30 per cent by 2017.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
