In world’s priciest home market, curbs have unwitting effect
TO SEE the unintended consequences of the Hong Kong government’s efforts to tame property prices, take a look at the latest batch of newly built apartments to go on sale.
At least 800 bids for 105 new units flooded developers of a remote new housing complex, and nearly all of them sold out in a single day last week. Such sellout crowds are becoming the norm at new projects this year as distortions caused by government attempts to cool property prices have nearly halted the supply of older, existing homes for sale. That’s driving demand for new ones offered by developers.
High stamp duties targeted at all but first-time local buyers, the centerpiece of a government push to finally cool the world’s most unaffordable housing market, have prompted both would-be sellers and buyers of existing homes to hit the brakes. Instead, buyers have piled into new homes, or the primary market, where developers entice buyers with tax rebates and even loans.
The upshot: Since Chief Executive Leung Chun-ying announced the latest round of property tightening in early November, prices have kept climbing and demand for new homes has kept soaring.
“With the stamp duties and mortgage curbs, nobody can get financing in the secondary market, and nobody needs to sell,” said Justin Chiu, executive director at Cheung Kong Property Holdings Ltd. “That is creating demand for primary homes, and developers can adjust prices when they see that demand is as strong as it has been recently.”
New home sales soared 48 per cent in January over December, compared with a 76 per cent decline in the same period last year, according to data from the government and residential property agency Midland Realty.
A batch of 188 units at China Overseas Land & Investment Ltd.’s new complex at Hong Kong’s old airport site, One Kai Tak, priced as much as 41 per cent higher than a first lot five months ago, sold out in one day in mid- January. Even in the lackluster secondary market, home prices are up 1.7 per cent since November, according to a Centaline Property Agency price index tracking Hong Kong’s residential properties. There is no index gauging new home prices.
A gauge of Hong Kong developers’ stocks has risen 12.3 per cent this year, out-pacing the 6.9 per cent advance of the broader Hang Seng Index.
Developers have been gradually increasing their share of Hong Kong’s property sales in recent years. The proportion of total new home sales has climbed from 10 per cent in 2010, before the government first began demand- curbing policies in 2012, to more than 30 per cent last year, government statistics show.
That trend may accelerate as the latest measures add more costs for individuals to sell their properties and buy new ones, analysts say.
The increase in stamp duties adds to restrictions such as the latest caps on mortgages the government introduced in February 2015. So home owners who want to sell a property and then seek a mortgage for a new apartment now find mortgage financing limited to 50 per cent, compared with as much as 70 per cent previously. — WPBloomberg