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Tuesday, November 13, 2018, 22:40
Property firm: HK home prices face at least 15% drop in 2019
By Dai Kaiyi
Tuesday, November 13, 2018, 22:40 By Dai Kaiyi

An aerial view shows residential and commercial buildings in the Kowloon district and ships sailing in Hong Kong's Victoria Harbour on Oct 30, 2018. (ANTHONY WALLACE / AFP)

HONG KONG – Home prices in the city will probably drop 15 percent by the end of 2019, according to Jones Lang LaSalle Inc (JLL). 

The decline could go even deeper – to as much as 25 percent – should the ongoing trade standoff between China and the US endures.

Hong Kong’s almost 10-year housing market bull run looks like it is coming to an end. 

Joseph Tsang, Executive Director, JLL Hong Kong

Besides escalating trade tension between the two biggest economies, slowing growth in the Chinese mainland’s economy, a sagging stock market and rising interest rates also weigh on the SAR’s property market.

“Hong Kong’s almost 10-year housing market bull run looks like it is coming to an end,” said Joseph Tsang, executive director at JLL in Hong Kong.

READ MORE: HK banks cut property valuations as home market teeters

Prices of mass residential properties have tripled since the 2009 global financial crisis, 63 percent higher than the 1997 market peak ahead of the Asian financial crisis, and 39 percent higher than the 2016 period after the US Federal Reserve’s first rate hike and Brexit took the global market by surprise. But growing uncertainty around the city’s economic outlook has seen prices dip 1.4 percent over the past two months.

The resilience potential for the coming price decline varies from different areas and it depends on the supply volume of an area, said Tsang, who thought areas with much lower supply could be pretty resilient to the forthcoming fall, whereas areas in New Territories such as Tseung Kwan O, Yuen Long and Tuen Mun - where sheer volumes of housing supplies are offered – could suffer from much more fierce competition among real estate developers, rendering even lower prices.

The SAR government has announced since late 2009 an array of “spicy measures” in an effort to cool down the city’s red-hot housing market, including lower loan-to-valuation (LTV) ratios, which limited the mortgages accessible to potential homebuyers, and higher tax levies to damp demand.

ALSO READ: HK needs to think creatively to solve its housing problem

One of the tax levied is Special Stamp Duty was set for prohibiting “property scalpers” in the city, who lifted home prices with deliberate intent, from doing any additional harm to the then-soaring prices.

Meanwhile, Ad Valorem Stamp Duty (or Double Stamp Duty), another tax levied for cooling off the property market, was lifted from as much as 8.5 percent to 15 percent in late 2016. The move on DSD was an attempt to cap purchases if the buyer already owns another residential property at the time of the subsequent purchase.

“We urge the government to remove the Special Stamp Duty, review the application of the Ad Valorem Stamp Duty and lift LTV ratios,” said Tsang.

Tsang likened the property market to a giant tanker, instead of a sports car, which needs a long time period to adjust and adopt new measures imposed, and the severity and duration of this market correction remains something “beyond the control” of the city’s government.

“However, the government will be in a better position to mitigate the growing downside risks in the macro-environment and orchestrate a soft landing for the housing market by addressing the three measures,” said the executive director of JLL in Hong Kong. “That would be in the best interest for Hong Kong.”

kevindai@chinadailyhk.com

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