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The Hong Kong Real Estate Market is Showing Signs of Cooling

by Marquette Turner Luxury Homes

in Investing in Property, Money & Business, News & Views, Real Estate Radar, Resources, Variety

New data show that the volume of deals in Hong Kong – one of the world’s most expensive real estate markets – is easing.

The number of Hong Kong property transactions in April was down 23% from the previous month, and down 27% from a year earlier, the Land Registry reported Wednesday. When measured by value, property transactions were also down 23% from March, and down 17% from a year earlier.

Residential deals were off even more sharply, falling 27% in April from March and 38% from a year earlier. By value, transactions were 25% and 27% lower, respectively.

The decline comes as local mortgage rates are starting to rise from rock-bottom levels, until recently some adjustable, rate loans were available at less than 1% a year.

Prices of Hong Kong properties jumped 24% last year on top of a 30% surge in 2009, according to government data, buoyed by abundant liquidity and persistently low interest rates. Home prices have now surpassed peak levels reached in 1997, the government recently declared. Many people in Hong Kong fear being priced out of the market, and the government has come under intense pressure to address the problem.

Starting late last year, officials have taken measures to cool the market, such as tightening loan-to-value ratios for the high end of the residential market, where prices have risen most quickly. They have also announced plans to introduce more moderately priced housing and sell more land through auctions, though analysts say these are long-term efforts that will do little to ease prices in the short term.

But while government measures have had only a limited impact, rising interest rates appear to be cooling sentiment. More recently, officials have warned investors to prepare for higher rates and tighter credit, and the potential impact they could have on property prices.

Polly Hui & Peter Stein

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