Hong Kong Real Estate Market Expected To Struggle In 2012

Real estate analyst Knight Frank expects the Hong Kong real estate market to struggle in 2012. They predict that more buyers will avoid committing to property purchases due …

Real estate analyst Knight Frank expects the Hong Kong real estate market to struggle in 2012. They predict that more buyers will avoid committing to property purchases due to the slow economy. Knight Frank also sees the rental market to favor tenants during the new year. Rents were already falling towards the end of 2011, and they expect that trend to continue. For more on this, continue reading the following article from Property Wire.

Concerns over an oncoming worldwide recession are affecting the appetite of potential home buyers in Hong Kong, according to the Knight Frank December 2011 Hong Kong luxury residential report.

At the same time, local and mainland banks in China have remained cautious towards mortgage lending. A number of banks raised their mortgage rates in November and early December, further hurting sentiment in the residential market.

Looking ahead to 2012 Knight Frank expects prices across all sectors to fall and rents to drop as well as some international companies downsize due to the gloomier economic outlook.

However, developers remained active in launching new luxury flats and were rewarded by encouraging responses, the report also says.

In November, the number of residential sales increased 3.3% month on month, the first rebound since August 2011, mainly driven by sales of primary flats.

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A total of 695 luxury flats worth HK$10 million or above were sold in November, about 160% more than the level recorded in October, the Land Registry’s statistics show. According to their respective developers, 206 units in The Wings in Tseung Kwan O and 170 units in the third phase of Festival City in Tai Wai were sold within two days of launch.
The satisfactory sales results were attributable to various beneficial packages on offer, including the provision for a second mortgage and a long transaction period, as well as their competitive prices, which were close to those in the secondary market.

Meanwhile, a 5,408 square foot new house in Providence Bay, Tai Po was reportedly sold for HK$29,380 per square foot, the highest price ever achieved for a house in the New Territories.

Overall potential home buyers focused on primary flats and paid less attention to the secondary market, prompting owners of secondary properties to become more flexible on prices. For example, a high floor flat at City One Shatin was reportedly transacted at HK$5.8 million, 8.5% lower than the asking price, while a 507 square foot high floor unit at Healthy Garden in North Point was reportedly sold for HK$3.89million, or 9.5% lower than its asking price and about 3% lower than the market price.
Overall, mass residential prices dropped 1 to 2% in November but in the luxury market, prices dropped a marginal 1% last month, as only individual home owners were prepared to sell their flats at a discount.

A 2,715 square foot duplex at Sorrento in Tsim Sha Tsui was reportedly sold for HK$63 million, some HK$15 million lower than the original asking price. However, this was still the highest price per square foot transaction in the development to date.

Meanwhile, a three bedroom flat at Park Tower in North Point was reportedly transacted at HK$20.8 million, which was about 10% lower than the asking price, but still 13.7% higher than its purchase price in 1997.

On the leasing front, landlords were more willing to lower their asking rents to secure tenants. More flats became available for rent in November, but take up remained low during the traditional slow season.

The market was further impacted by the surrendering of flats by some multinational companies which were downsizing due to the economic downturn. As a result, luxury rents fell at a faster rate of 2.1% last month, compared with 1.7% in October.

Rents in Hong Kong’s leading luxury residential areas dropped between 0.7% and 3.1% in November. Mid prices properties saw the largest drop of 3.1%, followed by the Peak and Jardine’s Lookout Happy Valley where rents declined 2.5% and 2.2%, respectively. Rents in Island South and Pokfulam declined a respective 1.3% and 0.7%.

Looking ahead, the central banks of the US, Canada, Britain, Japan, Switzerland and the European Union have eased the strain in the financial market by cutting the costs of borrowing by the Federal Reserve, in order to foster economic activity. Meanwhile, the People’s Bank of China has also lowered the reserve requirement ratio by 50 basis points, the first reduction since December 2008.
‘This could improve sentiment in the local property market, but residential transaction volume is expected to stay low in 2012, while the economic outlook remains unclear. Mass home prices are likely to drop 10 to 15% in 2012. However, with supply being limited, luxury residential properties are likely to outperform, with prices expected to decline up to 10% in 2012,’ the report concludes.

This article was republished with permission from Property Wire.


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