New Developments Drive Housing Market Sales in May
As the secondary market sees dwindling supplies and record-setting prices, home sellers have been having a good time over the past weeks. Almost all small units are selling at close to HK$6 million at the moment, forcing first-time buyers with insufficient funds out of the market. Judging by the number of registered transactions published in late April, I suspect that the number of pre-owned home transactions this month is likely to match or even surpass last May's figures. It is no wonder, then, that sellers in the secondary market are feeling very confident and rather aggressive with their asking rates. Some pre-owned homes are already more expensive than new ones, and we should expect prices to reach new heights.
A respected local investor recently told me that at present, housing prices are exceeding last year's peak levels and a readjustment period will be upon us soon. He didn't make predictions on how much higher the prices will go by the end of the year, but pointed out that right now is a bad time for first-time home buyers to enter the market. The probability of a housing market downturn is much higher than that of a major increase in home prices; as the whole world is plagued with political and economic uncertainties, the next global financial crisis could hit us at any moment, so first-time buyers with only one down payment at hand should be very cautious with their buying decisions. On the other hand, investors with money to spare looking to expand their portfolio don't have to worry too much about the high prices as long as they pick high-quality homes to purchase. That is because in the event of an unexpected market plunge, these wealthy investors will be able to buy in more units at extremely low prices, thus lowering the average cost of each property. If the government imposes more cooling measures to curb the rising prices, home owners who have just bought their first homes and speculators using leverage for their investments will be the ones likely to suffer the most. The reason is simple: first-time home owners don't have the funds to snap up cheap properties in times of a plunging market and will be at risk of falling into negative equity.
The result of the soaring prices in the secondary market is that the sales volume have quickly come down. Fortunately, the government has put a stop to developers selling new units by way of tender, and high loan-to-value ratio mortgages are helping new buyers get on the property ladder. A portion of home seekers who didn't find their ideal second-hand homes have now returned to the primary market. With new developments driving up sales in May, a market freeze is unlikely to happen in the near future.