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Wednesday, July 6, 2016, 23:06

HK 6-month homes sales hit new low

By Oswald Chan
HK 6-month homes sales hit new low
A high-rise residential building shrouded by fog in Hong Kong. Property agency Midland Realty said it recorded the “worst six months” — from January to June this year — for the housing sector in 25 years. (Bobby Yip / Reuters)

Property transactions in Hong Kong slumped nearly 40 percent in the first six months of this year from a year ago, with market analysts warning the slide will continue in the second half along with a further 10-percent retreat in homes prices.

The downcycle has been exacerbated by a confluence of negative factors, including the lingering fallout from Brexit, shrinking global and Chinese mainland economies and growing volatility in financial markets.

Midland Realty — one of the city’s largest real estate brokers — said it was the “worst six months” it has recorded for the housing sector since it began price surveys in 1991.

A total of 26,571 property deals were registered between January and June this year — plummeting 39.1 percent from the 43,636 deals signed in the first half of 2015.

The total value of residential-property sales dived 39.2 percent during the period to HK$189.5 billion.

“The prevailing uncertainties, such as the pace of US interest-rate hikes, and continued volatility in financial markets have depressed property transactions. We don’t expect property deals to rebound much from the current low level,” said Marcos Chan Kam-ping, head of research for Hong Kong, southern China and Taiwan at US property advisory firm CBRE.

Local real estate prices had rebounded in May for the second consecutive month, but are still 10 percent below the peak reached in September last year, according to the Rating and Valuation Department.

“The take-up of small and medium-sized apartments will continue, with signs pointing to stabilization in residential property prices,” said Jonas Kan Kwok-yu, head of Hong Kong and mainland property research at Daiwa Capital Markets. “There’s sizable pent-up demand in the market.”

But, he warned that Hong Kong’s housing demand can be significantly influenced by sentiment, while other analysts said new homes supply in the market, along with global economic turmoil arising from Brexit, could further dampen demand in the second half of the year.

As sales slip, leading developers have stepped up efforts to turn the tide.

Last month, Sun Hung Kai Properties (SHKP) launched an unprecedented homes loan program offering up to 120 percent of the sale prices for apartments at its Park Yoho Venezia project in Yuen Long through a three-year financing plan arranged by the developer’s finance company which is not regulated by the Hong Kong Monetary Authority (HKMA). Applicants are not required to submit any proof of income.

The 120-percent loan-to-value ratio is much higher than the standard bank mortgage ceiling of 60 percent for apartments valued at below HK$10 million, and 50 percent for units costing more than HK$10 million, as stipulated by the HKMA.

The offer only applies to buyers who already own an apartment valued at no less than 70 percent of the would-be purchase price of apartments at Park Yoho Venezia. The buyer’s existing property will be pledged as collateral for SHKP to extend the loan.

Under the SHKP’s financing plan, buyers need to fork out just 5 percent of the apartment’s price as down-payment to secure a mortgage loan of 120 percent of the value of an apartment at Park Yoho Venezia.

Starting from the fourth year, buyers have to switch the outstanding balance of the mortgage loan to a bank based on the property’s latest market value rather than the original acquisition price.
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