Hong Kong’s housing glut set to keep prices down despite tax cut

HONG Kong’s home sales have roared back to life since the government scrapped extra property taxes last month. A supply glut means a rebound in prices is likely to take much longer.

While property transactions have jumped sharply in the past two weeks, there is little evidence that values are rising, according to property agents and analysts. The abundance of apartments for sale, together with high borrowing costs and a weak economy, is expected to stunt price growth in the coming months.

Developers are focused on clearing their inventory for now and will not price homes higher than the market level, said Sammy Po, chief executive officer of the home division at Midland Realty.

For example, the first batch of apartments from Henderson Land Development’s Belgravia Place were priced at a discount, and the developer lifted them in subsequent batches only by single digits, despite an overwhelming response.

“There is a lot of inventory in the market,” said Po. “If prices are raised too high, buyers will just go for other projects.” He does not expect Henderson to hike prices significantly for the remaining units.

A lacklustre property market in the past year has led to the accumulation of unsold homes.

Residential units available in the primary market rose 6 per cent to 91,300 in the fourth quarter of 2023 from three months earlier, according to Jones Lang LaSalle. By comparison, only 13,000 new homes were sold on average annually from 2021 to 2023, government data showed.

“For 2024, we will have a very good figure in terms of transaction volume, but in terms of the pricing, we have to still face negative growth because of the competition in the market,” said Hannah Jeong, head of valuation and advisory services in Hong Kong at Colliers International Group.

She expects prices to rise in the fourth quarter, after the market absorbs some of the inventory.

SEE ALSO

Hong Kong issues new national security law bill with tougher jail terms

Hong Kong buyers rush to snap up homes after curbs removed

Hong Kong property agents expect more big-ticket foreclosures this year

Hong Kong’s biggest developers are lining up their project launches to take advantage of the improved sentiment to offload units. CK Asset Holdings started to promote its Blue Coast development comprising more than 600 units in recent days.

The second-hand market is in a similar situation. Since the curbs were lifted, transaction volumes have been rising and room for sellers to offer discounts has shrunk to 1 to 2 per cent from 5 to 10 per cent, said Po.

But he does not expect prices to go higher than the current level because there are still a lot of homes for sale. If the seller raises the price, the buyer can simply turn to the many other homes available in the market, he noted.

Hong Kong scrapped extra taxes on foreign buyers and existing homeowners in late February, and removed the special duty on sellers who offload their properties within two years of purchase. The latter will lead to more secondary units becoming available for sale, with more than 80,000 no longer subject to the tax penalty, according to Bloomberg Intelligence.

There are more than 41,000 listings on the website of Centaline Property Agency, Hong Kong’s biggest realtor. Average transaction numbers for secondary homes stood at about 41,000 each year for the past three years.

Secondary home prices in the week ended Mar 3, which included four days after the lifting of the curbs on Feb 28, fell 0.8 per cent from a week earlier, Centaline data showed. So far, prices are down 2 per cent since the beginning of the year.

UBS Group expects home values to decline 5 per cent this year after the tax policy change, versus its previous forecast for a 5 to 10 per cent drop.

Still, the rate of absorption is likely to be faster than previous years as more people snap up multiple homes after the policy change.

A buyer purchased all 24 units available for sale in Belgravia Place on Monday (Mar 11) for HK$166 million (S$28 million), Hong Kong Economic Times reported.

There are cases of investors buying homes in bulk recently, said Jeong from Colliers. The possibility of speculation is a concern for the city, but for now, “the priority is to bring up the economy first”, she said.