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Hong Kong property prices and rents expected to fall in 2012

March 3rd, 2012 · No Comments

Concerns over anapproaching worldwide recession are influencing the interest of potential home buyers in Hong Kong, this is according  to the Knight Frank December 2011 Hong Kong luxury residential report.

At the same time, local and mainland banks in China have continue to be cautious towards mortgage lending. A number of banks raised their mortgage rates in November and early December, further hurting sentiment in the residential market.

Looking ahead to 2012, Knight Frank anticipates prices across all sectors to drop and rents to fall as well as some international companies downsize by reason of  gloomy economic outlook.

However , developers continued to be active in launching new luxury flats and were compensated by encouraging responses, the report also says.

In November, the number of residential sales increased 3.3% month on month, the first rebound since August 2011, primarily driven by sales of primary flats.

A total of 695 luxury flats worth HK$10 million or above were sold in November, about 160% more than the level recorded in October, the Land Registry’s statistics show. According to their respective developers, 206 units in The Wings in Tseung Kwan O and 170 units in the third phase of Festival City in Tai Wai were sold within two days of launch.
The satisfactory sales results were credited to a variety of  beneficial packages being offered, including the provision for a second mortgage and a long transaction period. It also includes competitive prices, which were close to those in the secondary market.

For the meantime, a 5,408 square foot new house located  in Providence Bay, Tai Po was reportedly sold for HK$29,380 per square foot, the highest price ever attained for a house in the New Territories.

Generally,  potential home buyers focused their attention  on primary flats and paid less attention to the secondary market, making owners of secondary properties to become more flexible on prices. For example, a high floor flat at City One Shatin was reportedly transacted at HK$5.8 million, 8.5% lower than the asking price, while a 507 square foot high floor unit at Healthy Garden in North Point was reportedly sold for HK$3.89million, or 9.5% lower than its asking price and about 3% lower than the Hongkong property market price.
Overall, mass residential prices fell by 1 to 2% in November but in the luxury market, prices dropped a marginal 1% last month, as only individual home owners were prepared to sell their flats at a discount.
A 2,715 square foot duplex at Sorrento in Tsim Sha Tsui was purportedly sold for HK$63 million, some HK$15 million much lower than the original asking price. However, this was still the highest price per square foot transaction reported in the development presently.

Meanwhile, a three bedroom flat at Park Tower in North Point was supposedly transacted at HK$20.8 million, which was about 10% lower than the asking price, but still 13.7% higher than its purchase price wayback in 1997.
On the leasing front, landlords were more than eager to lower rentals on their property in order to secure tenants. In the month of November, more flats have became available for rent , however, take up continued to be low throughout the traditional slow season.

The market was further affected by the giving up of flats by some multinational companies which were downsizing by reason of the economic downturn.In view thereof, luxury rents dropped at a faster rate of 2.1% last month, as compared with 1.7% in October.

Rents in Hong Kong’s leading luxury residential areas dropped    between 0.7% and 3.1% in November. Mid prices properties witnessed the largest drop of 3.1%, followed by the Peak and Jardine’s Lookout Happy Valley where rents  decreased by 2.5% and 2.2%, respectively. Rents in Island South and Pokfulam declined a respective 1.3% and 0.7%.

Looking ahead, the central banks of the US, Canada, Britain, Japan, Switzerland and the European Union have alleviate the strain in the financial market by cutting the costs of borrowing by the Federal Reserve, in order to promote economic activity. Meanwhile, the People’s Bank of China has also lowered the reserve requirement ratio by 50 basis points, the first reduction since December 2008.
‘This could improve sentiment in the local property market, but residential transaction volume is expected to stay low in 2012, while the economic outlook remains unclear. Mass home prices are likely to drop 10 to 15% in 2012. However, with supply being limited, luxury residential properties are likely to outperform, with prices expected to decline up to 10% in 2012,’ the report concludes.


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