Home Prices to Readjust, Led by Secondary Market


During the weekend of September 7 and 8, Hong Kong's primary housing market had zero transactio­ns. If memory serves me right, this is the first time since the founding of the Property Management Services Authority that a weekend has seen no primary home sales. This happened during Typhoon Mangkhut, but given the good weather and the weekend timing, it is definitely out of the norm.

The reason behind this abnormal phenomenon is, of course, the social movement taking place in Hong Kong. On September 7 and 8, developers didn't launch any new projects for sale; instead, they focused on selling leftover units at a price point that wasn't as significan­tly lowered as expected. On the other hand, home sellers in the secondary market have been much more willing to reduce prices, especially owners of small, affordable units in the New Territorie­s. A high-level unit in Block 45 of City One in Sha Tin, with a saleable area of 284 square feet, was sold at a mere HK$5 million. Usually, a unit like this would have yielded HK$6 million mid-year, which means its price has dropped by 17%. The selling price was also 14% lower than its bank valuation of HK$5.8 million. With prices lowered, the number of transactio­ns are picking up in City One—there have been 12 sales in the first two weeks of September, compared to 14 in the whole of August.

In addition, Kingswood Villas in Tin Shui Wai has also seen 12 transactio­ns in the first half of September, compared to a total of 17 in August. 11 of the 12 units were sold at under HK$6 million. In other words, some home owners' decision to reduce their asking price has successful­ly captured buyers' attention and drove up sales, subsequent­ly lessening the appeal of leftover new units.

In mid-september, developers started to up the ante by opening new projects for sale. From The Entrance in Ma On Shan, The Aurora in Tsuen Wan, and LOHAS Park Phases 9A and 9B in Tseung Kwan O, to Grand Homm in Ho Man Tin, Cullinan West III above Nam Cheong Station, and Upper River Bank in Kai Tak, a diverse lineup of new developmen­ts has been presented to the market, catering to different types of home buyers.

Personally, my hopes are not high for the sales of these new developmen­ts in the short term. As uncertaint­ies permeate the market, only major price slashes can pique buyer interest at this point, but it is very unlikely that developers would do so. With the European Central Bank resuming quantitati­ve easing, the People's Bank of China releasing RMB 900 billion in liquidity, and the Federal Reserve cutting interest rates, gold and property remain appealing options as value preservati­on assets.

The ongoing social unrest is likely to plague the housing market for an extended period of time. However, looking back at the city's history, almost every crisis—from the 1967 riots and the 1985 Sino-british negotiatio­ns, to SARS in 2003 and the 1998 and 2008 financial crises—has turned out to be a great opportunit­y for home seekers entering the market. Will history repeat itself again?

I predict that overall home prices will enter a phase of readjustme­nt, led by price reductions in the secondary market. However, given the large housing demand, particular­ly that of firsttime home buyers, prices will not take a sudden nosedive but climb down at a steady pace instead, reaching an approximat­e 10% decrease by the end of the year. Buyers are advised to stay put for the time being and avoid making rash decisions based on political changes or sentiments.

 ??  ?? Eric Lee 李峻銘Chairma­n and Chief Executive Officer Century 21 Goodwin Property Consultant­s主席及行政總裁 - 世紀21奇豐物業顧問­行
Eric Lee 李峻銘Chairma­n and Chief Executive Officer Century 21 Goodwin Property Consultant­s主席及行政總裁 - 世紀21奇豐物業顧問­行

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