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Saturday, May 9, 2015, 12:27

HK home prices level off in March

By Felix Gao in Hong Kong
HK home prices level off in March
Although mortgage-tightening measures introduced earlier this year have slowed the pace of the property price surge, experts believe rentals may still see moderate growth until the peak period of the summer vacation ends. (Billy H.C. Kwok / Bloomberg)

Mortgage-tightening measures introduced earlier this year, coupled with expectations of an imminent US interest-rate cut, have stalled the local property market, with falls recorded in both the volume and value of transactions for small- and medium-sized apartments.

According to the latest data from the Rating and Valuation Department, the private-residential housing price index remained unchanged at 291.4 in March after having climbed for 11 consecutive months.

Prices of apartments with a net area of less than 40 square meters, which had led the increases in the past few months, fell 0.1 point, or 0.03 percent, from February — the first decline in nearly a year.

Prices of all apartments with a net area of less than 100 square meters remained stagnant in March, while those of luxury units of more than 100 square meters added 0.7 point.

However, the March figures reflected a 19-percent increase year-on-year, while property prices in the first three months of the year went up 4.7 percent overall.

"The stalled prices in March were in response to the Hong Kong Monetary Authority’s directive in late February requiring banks to lower the maximum loan-to-value ratio for self-use residential properties priced at below HK$7 million. Homes buyers are now under bigger pressure,” commented Buggle Lau Ka-fai, chief analyst at Midland Realty.

According to Midland Realty, 2,840 second-hand residential apartment transactions were registered from April 1 to 29 — down 18.1 percent from a month earlier and the lowest in the past 13 months.

Lau said the government’s measures have led to a fall in both the volume and value of small- and medium-sized apartment transactions. But, overall prices would not drop in the short term. “It’s hard to predict the price trend based solely on a single month’s data. The market could see major changes ahead of an interest-rate hike.”

The US Federal Reserve is widely expected to raise interest rates in the second half of the year, with Hong Kong almost certain to follow suit under the linked exchange-rate mechanism.

While real estate prices stopped climbing in March, rental growth has accelerated. The private residential rental index rose for the 13th straight month to 169.4 — a 0.8-percent increase from the previous month — with small- and medium-sized units leading the ascent.

Lau said rentals may still see moderate growth until the peak period of the summer vacation ends.

The government has vowed to boost the supply of residential units, with private developers expected to produce an average of 14,600 apartments annually in the next five years, representing an increase of more than 30 percent.

Chief Executive Leung Chun-ying said in his blog that an estimated 20,140 private residential apartment would be completed by next year — 71.7 percent higher than the average number of new apartments completed between 2005 and 2014, and the highest in the past decade.

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