Hong Kong won’t relax cooling measures

Romesh NavaratnarajahSeptember 30, 2015

Hong Kong property

The Hong Kong government has no plans to remove its property cooling measures for now, despite warnings that residential prices could fall, reported the South China Morning Post.

Investment bank UBS is among the latest to give out warnings that home prices could fall by up to 30 percent from now till end-2017. It based its forecast on the prospect of economic growth falling to one percent next year from 1.5 percent in H2 2015, and the unemployment rate rising to 4.5 percent from the current 3.3 percent.

“Unlike past down cycles that were triggered by global economic shocks, we believe this round of price reversals will be triggered by a deteriorating local economy,” said Eva Lee, executive director and head of Hong Kong and China property research at UBS. “Thus, we think price drops may come more gradually and over multiple years.”

However, Bocom International property analyst Alfred Lau expects to see a more drastic correction in home prices.

“The recent price cuts, rent cuts and defaults at new launches indicate the property market is entering into a correction,” he said, noting that developers’ stock prices indicated caution on property prices.

“We estimate the market has already priced in a 10 to 15 percent correction in property prices,” said Lau, adding that home prices may fall by as much as 20 percent in Q4 2015.

Meanwhile, JP Morgan expects home prices to drop by five to 10 percent per year in the next three years, while Morgan Stanley reckons prices will fall by five percent from current levels in December and remain flat in 2016.

Despite the warnings, Chief Executive Leung Chun-ying said there are no plans to abolish the property curbs – contradicting previous comments made by his finance chief.

Leung stated that his administration will continue to raise land supply and provide more homes in order to lower property prices and ease the housing shortage.

With many young people and families struggling to afford flats, “the government will continue to work hard. In essence, we will not scrap the cooling measures. We will continue to increase land supply. We will continue to suppress the demands for scalping, investment and the demand from people from outside Hong Kong,” he said.

Financial Secretary John Tsang Chun-wah had earlier said that the government will closely monitor developments within the real estate sector and make necessary adjustments to the measures to cool the market.

 

Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg

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