Property gulf points to woes ahead

The question of whether Hong Kong's property market has reached the tipping point has been asked too often over the years.

Mary Ma

Tuesday, September 11, 2018

The question of whether Hong Kong's property market has reached the tipping point has been asked too often over the years.

In 2015, housing prices dropped as the US Federal Reserve started raising interest rates. But the joy was short-lived. After six months of correction, they climbed again - largely due to money flowing into the SAR from the mainland as Beijing struggled to stem capital flight.

As of mid-2018, property prices are about 225 percent that of 1997.

So, people should be forgiven if they're skeptical about recent reports of flat owners slashing their asking prices by hundreds of thousands of dollars in order to flog their apartments in the secondary market. For the same question is being asked: has the housing market peaked?

Having learned from an anomaly in the recent past, nobody would be willing to commit themselves to another prediction, especially when sales in the primary sector are reportedly as robust as ever.

In one of the recent marketing exercises, Sun Hung Kai Properties swiftly unloaded more than 100 units at its project at Nam Cheong MTR Station at the weekend. Since sales opened on August 26, some 500 units have been sold, reaping more than HK$7 billion for the top developer.

The contrast between the boom in the primary market and the struggle in the secondary sector couldn't be more evident, which is somehow different from what we've seen to date.

While transactions in the secondary market have remained lukewarm, owners are obviously more willing to negotiate. In a recent deal at City One Shatin, the owner of a two-bedroom flat slashed the asking price by 14 percent in order to secure a deal. The unit, originally put on the market at HK$5.8 million in July, eventually changed hands at HK$5 million - a five-month low for similar units in the estate.

It wasn't an isolated incident.

So far this month, at least 10 apartments reportedly sold only after the vendors dropped their prices.

Reductions were also no longer confined to less desirable areas in the New Territories. For example, at Nam Fung Sun Chuen in Quarry Bay, a three bedroom flat recently sold for HK$8.5 million, whereas a similar unit in the same estate fetched HK$9.6 million in July.

So, is the property market reaching a tipping point? Your guess is as good as mine.

However, it's worth noting the primary market's boom doesn't reflect the market forces since developers - particularly the major players - have been offering purchasers up to 100 percent financing, so that buyers lacking the initial downpayment can still acquire the new flats, even if they ironically couldn't afford cheaper ones in the secondary market.

But there's no question that unfavorable market conditions are building up.

There were, first, the six government measures to insulate the subsidized front from the private sector. Then a heavy tax was levied against developers for hoarding flats, followed by emerging signs local banks are set to hike mortgage rates.

And lastly, don't forget the uncertainty triggered by the Sino-US trade war.