Housing bears, listen up: Hong Kong leaders’ surprise move to cool the world’s least affordable home market is set to spur an immediate plunge in prices and transactions as buyers and sellers hit the pause button, pulling down shares in developers.
Louis Chan, chief executive of the residential unit of Centaline Property Agency, sees transaction volumes plunging by 60 per cent to 70 per centin the next three months, and now expects a 5 per cent to 8 per cent drop in prices, after previously projecting an increase in that range. Ricacorp Properties’ Willy Liu said transactions will drop 30 per cent to 40 per cent in the next two months and prices will fall 5 percent.
“The action is likely to have an immediate impact on the market, with turnovers and property prices obviously pressured in a short period,” Ricacorp’s Liu said. “Small and medium-sized properties will be among the first to bear the brunt.”
Developers have already moved to suspend sales in the city, the South China Morning Post reported, with Sun Hung Kai, Henderson Land and New World Development cited as among those halting sales.
Hong Kong chief executive Leung Chun-ying is taking additional steps to cool the world’s costliest property market, where prices have rebounded after a short-lived dip amid demand from local and mainland Chinese buyers.
Surging prices have fuelled rising discontent in Hong Kong, where it takes an estimated 19 years of median household income to buy a home, according to Demographia, putting property outside the reach of the vast majority of citizens. Demographia last year found prices in the city the least affordable it’s measured in 11 years of surveying large urban markets.
In a televised conference including the city’s top-ranking officials, the government announced plans Friday to raise the stamp duty to 15 per cent for all residential purchases – except for first-time buyers who are permanent residents. Until now, the highest levy for residents was 8.5 per cent, while foreigners already paid a 15 per cent stamp duty.
The changes mean foreign buyers will now pay an effective 30 per cent stamp duty.
Mainland buyers hedging against a falling yuan and an abundance of financing have undone the government’s previous attempts to make housing more affordable. Senior officials also voiced concern that soaring prices could threaten financial stability.
It’s good to see that Canada, Singapore, London and now Hong Kong still give a shit about their children. We prefer to eat ours so Sydney and Melbourne will shunt up the list for Chinese specufestors accordingly.
Bring it on then. Build until it crashes permanently into massive oversupply.
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.
