Skyline is seen over the Victoria Harbour in Hong Kong, China on May 26, 2021. (PAUL YEUNG / BLOOMBERG)
The Hong Kong Special Administrative Region government should consider easing measures intended to cool down the housing market now that house prices are trending lower, global real estate services provider JLL said on Wednesday.
According to the firm, the prolonged up-cycle in Hong Kong’s residential market has started to reverse course as the monthly residential sales transactions for the first nine months of this year dropped to their lowest level in 20 years, with an average of only 4,100 flats per month changing hands.
According to JLL, the prolonged up-cycle in Hong Kong’s residential market has started to reverse course as the monthly residential sales transactions for the first nine months of this year dropped to their lowest level in 20 years, with an average of only 4,100 flats per month changing hands
Meanwhile, the company’s mass residential price index shows that home prices have dropped by over 7 percent over the last nine months and are expected to fall by over 10 percent for the whole year.
In the luxury residential market, an average of 500 flats valued at over HK$20 million ($2.55 million) have been sold every quarter over the past nine months – a decrease of 55 percent of the deal volume in 2021 and a fall of about 40 percent compared with the average quarterly transactions over the last five years.
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“The down-cycle in the housing market has just started and the market will continue to face headwinds. Although home prices are unlikely to fall off a cliff, the city will probably suffer a prolonged down-cycle that we witnessed in 1999 to 2003 due to interest rate hikes, a reversal in liquidity, weakening global and regional economics, and geopolitical concerns,” said Joseph Tsang, chairman of JLL in Hong Kong.
“If the cooling measures remain amid the backdrop of the global economic downturn and political turmoil, we will see a sharper price correction and rising cases of owners in negative equity,” he added.
Tsang suggested that the government should consider removing the punitive stamp duties to help ensure developers don’t slow down their urban renewal efforts amid rate hikes, as they might be more cautious about bidding for land.
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He added, the government could consider adjusting the Special Stamp Duty so that it applies only to vendors who make a gain after selling their flat, thereby freeing loss-makers from SSD liability in transactions involving the sale or transfer of commercial properties.
