Hong Kong property costs will not rise shortly as measures are relaxed
Residential buildings in Hong Kong, China on October 23, 2023.
Vernon Yuen | Nurphoto | Getty Pictures
Hong Kong’s chief John Lee this week eased the city’s decade-old residential property cooling measures — however questions stay on whether or not it is sufficient to spice up market sentiment and low transaction volumes for the non-public housing sector.
“Though rest of property restrictions was extremely anticipated, the BSD [buyers’ stamp duty] reduce from 15.0% to 7.5% stunned us; the opposite relaxations had been in-line,” Citi’s Ken Yeung wrote in a word.
He would not anticipate the transfer to reverse downward development in Hong Kong’s property costs as rates of interest stay excessive.
In accordance with knowledge from actual property company Midland Realty, the second-hand property market common turnover ratio between 2017 and 2023 stands at 3.7%. That is in contrast with 8.7% earlier than the cooling measures took impact in 2010.
Buggle Lau, chief analyst at Midland Realty instructed CNBC the common turnover ratio in 2022 to 2023 are at historic lows, as property costs have corrected down by practically 20% since their peak in August 2021.
He expects the coverage tackle will give property costs “an opportunity to stabilize” and for volumes to select up.
For the market to totally recuperate, each when it comes to worth and quantity, rates of interest must come down subsequent 12 months, the property analyst mentioned.
He expects an extra 5% draw back on costs within the first half of subsequent 12 months ought to there be a fee reduce.
Owners’ struggles
Hong Kong home-owner KC Mok has been attempting to promote his condo earlier than his household immigrates on the finish of the 12 months — a well-liked purpose for individuals promoting their property lately.
The 41-year-old instructed CNBC that his 707 sq. ft. 3-bedroom condo is presently itemizing at $9.5 million Hong Kong {dollars} ($1.21million), 20% decrease than his buy worth in 2019.
He mentioned many individuals have been viewing his place, however the one supply he obtained up to now is a mismatch.
“Now after we come to promoting the condo, we discovered that the worth of the condo [is] already like $2 million {dollars} much less, so somewhat bit depressed however now we have to depart so it is the timing perhaps,” Mok mentioned, acknowledging that the newest cooling measures “will assist somewhat bit” for his scenario.
In the meantime, 33-year-old Kitty Yiu considers herself “fortunate” as she bought her condo and began renting in February, simply earlier than property costs fell and rates of interest rose.
Yiu gave beginning to her firstborn earlier this 12 months and wanted a much bigger dwelling to accommodate her rising household.
“To be trustworthy, we’re nonetheless in a wrestle to see whether or not we must always purchase a brand new flat, like to purchase a flat once more,” she mentioned.
“I feel the value at this second continues to be excessive, even when it is having a downward development, however for me I feel it is nonetheless overpriced,” mentioned Yiu who would not assume the newest coverage aid would improve her urge for food to buy a home.
Not like Mok and Yiu, Eugene Regulation faces the wrestle of rising mortgage charges as a brand new home-owner.
Collectively along with his mom, Regulation, who’s 30, bought a flat at pre-construction in 2021 and moved in final 12 months. His mortgage fee began at 1.9% and is presently at 3.375%. Meaning he must pay a further HKD $6,000 ($767.09) monthly for the curiosity, which he says makes him really feel “so dangerous.”
“[It was] surprising … as a result of I anticipated the HIBOR might rise however I did not anticipate the prime fee may also rise, and likewise in a really excessive share.”
Potential homebuyers in Hong Kong can select to peg their mortgage fee with HIBOR or prime fee – often known as the “H Plan” and “P Plan.” HIBOR refers back to the rate of interest for interbank borrowing, whereas prime fee is set by particular person banks.
In a low rate of interest setting, the prime fee is often the extra standard alternative as it’s thought-about extra steady, and simpler for the mortgagor to make monetary plans.
Regardless of regretting the timing of his buy, Regulation mentioned the newest easing of coverage wouldn’t have affected the choice.
Dangers for Hong Kong property
A current report from UBS confirmed Hong Kong is the sixth overvalued metropolis on their International Actual Property Bubble Index. Zurich, Tokyo and Miami are the highest three.
“Largest threat [to Hong Kong’s property market] will probably be [a] pro-longed high-rate setting, and therefore additional mortgage price improve. Longer run will probably be geopolitical threat,” mentioned UBS’s china property market Mark Leung in an e-mail to CNBC.
Whereas describing the present sentiment as “a bit weak,” he expects the coverage tackle would launch sizable buying energy from non-local expats who’re ready to develop into everlasting residents.
With the second-hand market bid-ask unfold remaining excessive and many householders not prepared to promote their properties at a reduction, Leung mentioned he expects little room for property costs to reverse the downward development.
For the first market, he expects builders will now be extra prepared to chop costs so as to increase gross sales and “recycle money, given larger rate of interest setting.”
“Value-wise needs to be muted, as we predict builders could also be aggressive in worth setting, therefore cap the value rebound potential,” he added.
