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Thursday, August 4, 2016, 23:19

Dark clouds still hover over SAR homes market

By Oswald Chan

Dark clouds still hover over SAR homes market
The recent upswing in local property prices, backed by a favorable market response to the latest government land sales, including a record HK$4 billion paid by a Beijing-based developer for a residential site in Yau Tong on Wednesday, is still not enough to convince pundits that the homes sector may have turned the corner.

Market gurus say that despite improved market sentiment and prospects of another US interest-rate hike this year being held back by Britain’s decision to abandon the European Union, global economic uncertainties remain in place.

Prices of private residential homes have rebounded since April this year. According to the Rating and Valuation Department, the price index of private domestic units stood at 275.7 in June — the same as that for May, but was up 1.58 percent over the March reading of 271.4.

Investor response to government land sale tenders has been better than expected. Hong Kong-listed mainland builder Minmetals Land on Wednesday forked out a record HK$4 billion, or HK$7,068 per square foot, for an 113,000-sq-ft residential plot in Yau Tong, beating market expectations by more than 40 percent.

Manhattan Realty — a smaller Canada-based developer — last month secured a Tai Po residential site for HK$1.18 billion — more than 50 percent higher than anticipated.

The favorable response was attributed to a fresh US interest-rate increase this year likely to have been put on the back burner following the shock waves triggered by the Brexit vote.

“With the anticipated rebound in property trading in the second and third quarter, we’ve revised upward our homes price forecast for 2016 — from a negative 5 to 10 percent, to a negative 3 to 5 percent,” Midland Realty’s Chief Executive Officer (residential) Sammy Po Siu-ming said on Thursday.

The city’s largest real estate brokerage agency estimates that the number of first-hand and secondary homes transactions in the second half of this year would hit 9,000 and 18,000, respectively.

“The Brexit vote may mean that real interest rates will stay low for longer than we have assumed up to now, to the near-term benefit of Hong Kong and other regional markets. The effective real interest rate (nominal interest rate minus inflation rate) in Hong Kong is currently a negative 2.1 percent. No other major Asian market has experienced negative real rates since the end of the global financial crises in 2009,” said Andrew Haskins, research and advisory executive director at global commercial real estate firm Colliers International.

Despite the renewed optimism, Hong Kong’s property market remains clouded by a host of uncertainties, ruling out hopes that the local market has rebounded on a solid basis.

According to data from the Transport and Housing Bureau, residential apartment supply in the next three to four years will reach 93,000 units — the highest level ever — indicating that abundant supply may restrain prices.

“The current homes price index in Hong Kong shows a tug-of-war exists between prospective buyers and sellers. Therefore, prospective buyers should exercise prudence when considering buying a home,” Secretary for Development Paul Chan Mo-po said on Thursday.

In its latest research report, real estate advisory firm Jones Lang LaSalle (JLL) said: “In view of the surge in large-scale project launches, developers are likely to slash prices further to lure buyers, putting pressure on secondary homes owners to cut prices and lock in gains.”

“This is nothing more than a temporary rebound during the course of a downturn. It does not imply that the property market has turned the corner,” warned Henry Mok, capital markets regional director at JLL in Hong Kong.
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