Date
19 January 2017
Home prices, which have fallen 13 percent from a September peak, will have to plunge another 19 percent before the government intervenes, according to analysts. Photo: Internet
Home prices, which have fallen 13 percent from a September peak, will have to plunge another 19 percent before the government intervenes, according to analysts. Photo: Internet

Hong Kong home prices have further to fall before controls ease

Hong Kong developers face a longer wait for government property curbs to ease amid a slump in home prices.

Declines in the residential property market have to get a lot worse before Hong Kong’s lawmakers would consider rolling back measures they introduced more than five years ago to rein in prices, Bloomberg reports, citing analysts and economists.

On average, they estimate that home prices, which have fallen 13 percent from a September peak, will have to plunge another 19 percent before the government intervenes.

A correction of that magnitude would be Hong Kong’s biggest since a six-year downturn that lasted until 2003 and would exceed declines during the 2008 global financial crisis.

Still, officials may be willing to stomach such a historic slump because they’re more concerned with the widening wealth inequality that’s helped drive chief executive Leung Chun-ying’s popularity to a record low.

Hong Kong ranks as the world’s least affordable housing market and Leung reiterated in May that prices remain too high.

“Any policy change has a policy risk,” said Eva Lee, a UBS Group AG property analyst in Hong Kong.

“If we are still in a low-interest rate environment, if they encourage investment demand, the market will get crazy.”

Hong Kong’s de facto central bank and lawmakers in 2010 embarked on a plan to cool soaring property prices that had put home ownership beyond the reach of most people.

The measures included higher minimum down payment requirements on mortgages, taxes on non-resident homebuyers, so-called ad valorem taxes tied to a home’s value and a special levy for purchasers who flip properties within three years.

Together, these taxes can add as much as 42.5 percent to the cost of a HK$10 million (US$1.3 million) home for non-resident buyers.

The property market reversal drove residential transactions to a 25-year low in January and has squeezed profit margins at developers.

The combined market value of Hong Kong’s five largest real estate companies has tumbled by HK$345 billion in the past year.

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