“I already have a house in my name and live in it, but until now I had not thought of buying a second house as an investment because of the 15 per cent ad valorem tax,” said the 36-year-old. says a permanent resident. she said.
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How Hong Kong's housing market became the most affordable in the world
How Hong Kong's housing market became the most affordable in the world
Such curbs were originally introduced to cool the market's hyperspeculation that took hold in the early 2000s and drove home prices to spectacular levels.
Mak, who works in the beauty industry and has six years of experience investing in stocks and bonds, said the withdrawal of Hong Kong's stock market has made real estate a viable investment option again amid the downturn in the city's stock market. talk.
“Foreclosed properties are generally cheaper than apartments on the secondary market,” Mack said.
“After the announcement, many home sellers immediately rejected my offer, but with foreclosures, if you meet the minimum price, you'll get a deal unless there's a competitor.”
“The recent recovery was driven primarily by pen-up demand,” said Donald Choi, executive director and CEO of Chinachem Group.
“Hong Kong's property market will continue to be relatively stable. A healthy market is one where there is supply in the market and property prices rise in line with inflation.”
As soon as restrictions were lifted, the market saw a surge in trading volumes. A total of 3,971 new and secondary homes were relocated in March, an increase of 67% from the previous month. This is the highest number of homes sold since May last year, when 4,003 homes were sold, according to Land Registry data.
However, this has not led to a rise in prices.
“Transactions are picking up, but instead of rising, prices are falling further,” said Joseph Tsang, chairman of real estate consultancy JLL Hong Kong.
Tsang said the market was unlikely to return to its peak, citing high inventory levels for new housing projects and the likelihood that interest rates would remain high even if the Federal Reserve cuts rates this year. .
One of the main reasons why Hong Kong house prices have increased by 271.7% since 2009 was limited supply.
There are currently more than 20,000 completed but unsold units on the market, said Norrie Lee, senior director of project strategy and consultancy at JLL in Hong Kong.
Construction of approximately 22,270 private houses is expected to be completed this year, an increase of 6% from the previous year. The number is expected to rise to 25,530 next year, with supply mainly concentrated in Kowloon and the New Territories, according to data from the Ratings Bureau.
JLL says it would need around 25,000 to 30,000 direct transactions per year to absorb this many units and reach a more balanced supply-demand relationship.
“Given that the average number of transactions per year is about 15,000 to at most 20,000, it would take at least four years to exhaust all available inventory, and house prices would not rise significantly. It's very difficult,” said Will Chu, senior research analyst. Hong Kong and China assets at CGS International Securities.
Chu expects interest rates to fall to around 2.5% to 3%, which will ease the burden of mortgage repayments. But this is much higher than the ultra-low interest rate environment that has supported rapid home price growth for years.
“It's hard to imagine that interest rates will return to their previous levels,” he said.
Strong sales in major housing markets are being driven in part by developers offering deep discounts to attract buyers returning to the market.
According to Chinachem's Choi, this in itself may indicate that real estate prices will not experience the same spectacular growth enjoyed in previous years.
“it is [developers’] “We are cautious about the outlook for the market.”
Last month, Wheelock Properties priced its new Tseung Kwan O project, Season Place, at the lowest price in five years in the area, selling the entire first lot of units in one day. Li Ka-shing's flagship developer CK Asset Holdings has launched its first apartment in Blue Coast, above Wong Chuk MTR station, at the lowest average price per square foot of any other development in the Southside area. Released.
JLL's Tsang said this price war is also impacting the secondary market.
“Old homes are being squeezed because new apartments are priced close to or lower than that,” he said.
Home sellers are refraining from raising asking prices as the supply of residential homes increases with the removal of Special Stamp Duty (SSD). The tax imposes up to 20 percent of the value of residential properties resold within three years, with higher fees applicable for shorter periods.
Over the past two years, an increasing number of cash-strapped property owners have been preparing to sell their properties, and will be selling their apartments at a loss, hit by high interest rates and a slow economic recovery, said Derek Chan, head of research at RicaCorp.
A total of 484 loss-making trades were recorded in March, with seven of them resulting in losses of more than 35%, Chan said.
The first phase unit at Emerald Bay in Tuen Mun was recently sold by its owner for HK$2.34 million. This is almost half of the 2020 purchase price of HK$4.04 million.
“The house price index is based on secondary market transactions. If there is pressure on the market, it could hinder the rise in property prices,” he said.
Meanwhile, mainland Chinese buyers have started buying apartments in Hong Kong, benefiting from the removal of Buyer's Stamp Duty (BSD) and New Residential Stamp Duty (NRSD) (from up to 30% before the halving). October. The levy was established to control excessive capital inflows from mainland China.
The share of mainland buyers has jumped to 40% in some recent home sales and accounted for 70% of primary sales of luxury homes in March, up from less than 50% before curbside removal, according to reports. . JLL's monthly report.
The city's various workforce initiatives and investment immigration programs are helping to maintain this influx.
“However, how big the demand will be will also depend on China's economic recovery,” said Chau Kwon Win, head of the real estate and construction department at the University of Hong Kong.
Chau said house prices are more likely to rise than fall in the long run as demand increases, but growth will be limited to a certain level.
“The government is fully capable of controlling demand from the mainland,” he said. “If too much capital inflows causes house prices to soar, the government could reintroduce stamp duty to curb it.”
Raymond Tsoi, chairman of Asia Property Holdings, said that the number of investors in the market seeking short-term speculative profits will decrease as real estate prices have not recovered and there is not much room for them to rise significantly in the future. He said it would be. Years of experience in the real estate industry.
“Investment returns will remain low due to high investment costs,” he said.
Meanwhile, Mr. Mack is thinking of reselling the one house he bought in Tuen Mun next year and leasing the remaining two, expecting a rental yield of 3-4%.
“I don't think the real estate market will rise as crazy as it has in the past, but it's been quiet for so long that it's time for some momentum,” he said.
“We hope that the real estate market will continue to grow in a healthy manner. Rapidly rising house prices are not good, and the government may change its curbs at any time.
We are making investments with an eye toward the next three to four years. If the outlook is stable, I will continue to buy. ”
