Taming the market, but it's still skybound

HK's record homes prices, bullish talk by big wig builders may spark fresh buy spree

Record prices set by Hong Kong's biggest developer for one of its much-hyped projects in Yuen Long, as well as hawkish remarks by one of the Chinese mainland's most aggressive builders, may have set the tone for yet another scramble for residential properties in the land-starved city to beat further price increases.

Prices of new homes in Hong Kong have continued to go through the roof despite the government's deep resolve to keep them in check with a raft of market cooling measures, including the latest 15-percent stamp duty, with effect from Nov 5 last year, slapped on homes purchases by non-permanent residents, as well as residents who already own another residential property at the time of the subsequent purchase.

Sun Hung Kai Properties - controlled by the Kwok family and reputed to be one of the world's most valuable real-estate companies - is reported to have set a record price for residential properties in the northwestern New Territories with the launch sale of apartments at its Grand Yoho Phase Two in Yuen Long, which is nearing completion.

After taking into account rebates of more than 19 percent offered by the developer, the average price for the upper middle-bracket project's first batch of 166 units stands at HK$14,488 per square foot - 21 percent higher than the prices for flats sold under the first batch for Grand Yoho Phase One at HK$12,000 per square foot in August last year.

One unit, measuring just more than 400 square feet, and located on the top floor of Grand Yoho Phase Two, is said to be going at above HK$8 million.

China Overseas Land & Investment Ltd (COLI) - the mainland's fifth-largest builder in terms of sales and which has been aggressively bidding for land in Hong Kong recently - has voted with its feet in the city's long-term confidence in the property sector.

The group, which won two sites in 2013 at the old airport site at Kai Tak, Kowloon, for a total of HK$4.5 billion to build flats under the "Hong Kong Property for Hong Kong People" program, has chipped in with a bullish tone, saying it will raise prices for units at its One Kai Tak Phase Two project.

Prices for the first batch of 125 units at One Kai Tak Phase Two will range from HK$14,889 to HK$22,240 per square foot after factoring in rebates, while the average price for units under the project's Phase One stood at HK$16,000 per square foot last September.

Shrugging off prospects of a rapid pace in US interest-rate hikes this year, Tony Yau Wai-kwong, managing director at COLI affiliate China Overseas Property, emphasized there's still room for prices to go up for One Kai Tak Phase Two, given solid demand.

With soaring homes prices that have well shattered the dreams of many potential buyers in Hong Kong, local residents seem to have all but given all hope of cheaper homes coming their way.

A recent survey conducted by Citibank shows that a growing number of residents are now bracing themselves for property prices to climb further in the next 12 months, despite projections by some housing experts to the contrary or another possible wave of measures by the government to cool the overheated market. Statistics show that, in the first quarter of last year, only 9 percent of those interviewed believed that homes prices would continue to rise. But, in the fourth quarter of 2016, the figure had gone up to 43 percent.

Amid vigorous demand, the survey also shows that 18 percent of the respondents had the intention to buy a home in the fourth quarter of last year following the government's tightening measures, compared to 13 percent in the second quarter. And, the percentage of respondents who did not intend to buy fell from 66 percent in the first quarter to 50 percent in the fourth quarter.

According to the survey, the percentage of residents planning to buy a home declined from 12 percent in September last year to 7 percent in December after the government rolled out a raft of cooling measures, showing that even there's still demand for homes, worries about future housing policies and uncertainties will affect their final decision.

Lawrence Lam Chi-kong, head of retail banking at Citibank, said looming US interest-rate hikes and a still subdued economic environment will affect property purchases. The bank expects the US Federal Reserve to lift interest rates two to three times this year, each by 25 base points.

In anticipation of the government putting of further market cooling measures, Citibank said in its latest report it expects local homes prices to drop 15 percent this year, noting that the latest tightening steps have taken effect in dampening the transaction volume.

"When the transaction volume dries up, homes prices in Hong Kong will turn volatile and drop sharply and quickly," says the report.

cherrylin@chinadailyhk.com

(HK Edition 01/06/2017 page9)