HK housing market looks set for a correction

September saw the fewest luxury home transactions in Hong Kong in data going back to 2005, according to Ricacorp Properties.
September saw the fewest luxury home transactions in Hong Kong in data going back to 2005, according to Ricacorp Properties.PHOTO: AGENCE FRANCE-PRESSE

Signs of downturn include plunge in prices, luxury sales and mortgage applications

HONG KONG • Signs of a housing market downturn in Hong Kong are spreading after the city's first interest rate increases in 12 years and an escalation in trade tensions between China and the US.

"We are now in a correction like the one we had during 2015 to 2016," said Mr Cusson Leung, JPMorgan Chase's head of property and conglomerates research in Asia, citing buyers' fears for the outlook of both the Hong Kong and Chinese economies.

Home prices fell 13 per cent during that downturn versus a decline of about 3 per cent so far this time around.

The Hong Kong Monetary Authority needs time to assess if there is a downward cycle that could lead to market curbs being loosened, its chief executive Norman Chan told lawmakers yesterday.

Five weeks after banks raised rates, here are several signs of a faltering market.

MORTGAGE APPLICATIONS DROP

Applications recorded the biggest month-on-month drop in 20 years in September, according to Centaline Mortgage Broker. The number of applications slid 56 per cent to 7,977, the Hong Kong Monetary Authority reported.

Ms Ivy Wong, managing director at Centaline Mortgage Broker, cited banks' readjustments of new mortgage rates in August as something that played a key role in the decline to the lowest level in 30 months.

LUXURY SALES PLUNGE

In one well-publicised anecdote, a buyer forfeited an estimated HK$54.2 million (S$9.5 million) deposit after walking away from a deal to buy a house on The Peak.

That is only part of the picture, with September seeing the fewest luxury home transactions in data going back to 2005, according to Ricacorp Properties. That consisted of 36 sales out of a total of 35 developments tracked by the firm.

"A lacklustre stock market and the China-US trade war have led to a wait-and-see attitude for investors and end-users," said Mr Derek Chan, Ricacorp's head of research.

AGENTS TAKE A HOLIDAY

Midland Realty, one of Hong Kong's biggest property agencies, had news for its 100 worst-performing employees last month. The bottom 10 would have to leave, the next 55 would be asked to take leave without pay for at least three months, and the work of the remaining 35 would be closely monitored.

Midland, which has more than 4,000 agents, said the policy had long been in place, but would be strictly enforced from this month.

PRICE CUTS

Newspaper reports and statements from agencies are showing substantial price cuts for sales of individual properties.

A two-bedroom apartment in Kowloon Bay went for 28 per cent - or HK$1.9 million - less than the asking price in August, Apple Daily reported late last month.

Another two-bedroom unit in a nearby district sold for 17 per cent less. According to Centaline Property Agency, that seller was willing to lower the price by HK$1.7 million after some negotiation.

TUMBLING SALES

The value of new-home transactions last month fell to the lowest in six months at HK$12.5 billion. The number of transactions tumbled 43 per cent from September to 1,140, data from Midland Realty showed.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 06, 2018, with the headline 'HK housing market looks set for a correction'. Print Edition | Subscribe