Skip to main content

Hong Kong property sales plunge 60% -- with prices following

By Ramy Inocencio, for CNN
May 10, 2013 -- Updated 0003 GMT (0803 HKT)
Hong Kong property sales have plunged 60% over the past year. Analysts say property prices have fallen 2%-3% since January.
Hong Kong property sales have plunged 60% over the past year. Analysts say property prices have fallen 2%-3% since January.
STORY HIGHLIGHTS
  • Hong Kong property sales fell 60% in April 2013 year-on-year
  • Government policies aimed at short term investors, mainland Chinese taking effect
  • Fall in sales volumes hit both residential and commercial properties
  • Analyst: Average property prices fell 2-3% since March; may fall no more than 10%

Hong Kong (CNN) -- The volume of Hong Kong property sales fell 60% compared with last year in a sign that recent government policies are cooling one of the world's most expensive real estate markets.

The Hong Kong Lands Registry recorded about 4,400 sale and purchase agreements in April with a valuation of $4 billion -- a 48% drop compared with the previous year.

"I'm not surprised," says Buggle Lau, chief analyst for strategic development and research at Midland Realty. "This is largely due to the measures implemented by the government. Residential property transactions -- primary and secondary -- dropped significantly. Non-residential transactions also dropped -- industrial spaces, car parks, commercial spaces."

The slowdown in Hong Kong's property sales was expected, echoes Simon Lo, executive director of research and advisory at Colliers International in Hong Kong.

Retail rental space rising in Hong Kong
The $640,000 parking space
Hong Kong punctures property bubble

"Most homeowners find they don't have a very strong reason to sell," he says. "They can wait for a couple of years" because of the government's property policies.

On February 22, the city announced a doubling of the existing stamp duty, or DSD, to 8.5% to target investors who want to buy a second property to lease. From April 2010, that rate had been set at 4.25%.

In October 2012, to target short-term investors seeking to flip a house for profit, Hong Kong extended the existing special stamp duty, or SSD, on property resales from two to three years. If the owner sold the property within six months of purchase, a 20% duty would apply -- between one and three years, a 10% levy would apply.

Also in October, Hong Kong enacted a 15% buyer's stamp duty, or BSD, against home purchases by foreigners.

"Altogether, we're talking about an additional 40-plus percent increase in costs," says Lo. "So you can imagine if you're the buyer then you're just going to hold on and wait."

Hong Kong's layers of levies have also stifled interest from mainland Chinese buyers -- with the 15% tax for foreigners widely interpreted as an attempt to stop them.

"Two years ago, 40% to 50% of all home transactions in Hong Kong were by mainlanders," adds Lo. "Now most buyers are local and most mainlanders aren't making any moves."

In Hong Kong's super luxury market, defined around $13 million and above by Colliers, "mainland buyers have all dried up" says Lo. Regular luxury homes, defined at around $2.5 million and above, can often be found in Hong Kong's prime districts of the Mid-Levels and the Peak.

"Two years ago, we would normally have ten to 15 luxury home sales every week. Now it's less than five," Lo says.

Hong Kong property has notoriously been some of the most expensive in the world for years. As recently as spring 2012, Savills found Hong Kong as the most expensive in a company survey, outranking Singapore, London, Tokyo and Paris. Property prices soared in the special administrative region 50% between 2010 and 2012.

Just last year, Hong Kong's priciest apartment -- the Frank Gehry-designed Opus -- sold for $58 million making it one of the most expensive residential properties in the world.

But now, as property transactions fall, property prices will follow, say Lau.

"They are falling already," he says. "The average price correction has been 2-3% from March and April -- and it will carry on in May. But property prices have dropped by as much as 6% between January and March for some properties already."

Lau adds that property prices "are very likely" to continue to fall but by "no more than 10%".

"It's all supply and demand. Demand has dropped significantly even as supply has stayed the same. The only option is to lower the price."

ADVERTISEMENT
Part of complete coverage on
September 16, 2014 -- Updated 0929 GMT (1729 HKT)
Christians in eastern China keep watch in Wenzhou, where authorities have demolished churches and removed crosses.
September 10, 2014 -- Updated 0538 GMT (1338 HKT)
Home-grown hip-hop appeals to a younger generation but its popularity has not translated into record deals and profits for budding rap artists.
September 9, 2014 -- Updated 0545 GMT (1345 HKT)
Reforms to the grueling gaokao - the competitive college entrance examination - don't make the grade, says educator Jiang Xueqin.
September 5, 2014 -- Updated 1218 GMT (2018 HKT)
Beijing grapples with reports from Iraq that a Chinese national fighting for ISIS has been captured.
September 1, 2014 -- Updated 0200 GMT (1000 HKT)
CNN's David McKenzie has tasted everything from worms to grasshoppers while on the road; China's cockroaches are his latest culinary adventure.
September 5, 2014 -- Updated 0057 GMT (0857 HKT)
Beijing rules only candidates approved by a nominating committee can run for Hong Kong's chief executive.
August 29, 2014 -- Updated 1914 GMT (0314 HKT)
China warns the United States to end its military surveillance flights near Chinese territory.
August 29, 2014 -- Updated 0312 GMT (1112 HKT)
China has produced elite national athletes but some argue the emphasis on winning discourages children. CNN's Kristie Lu Stout reports
August 19, 2014 -- Updated 0513 GMT (1313 HKT)
Chinese are turning to overseas personal shoppers to get their hands on luxury goods at lower prices.
August 15, 2014 -- Updated 0908 GMT (1708 HKT)
Experts say rapidly rising numbers of Christians are making it harder for authorities to control the religion's spread.
August 11, 2014 -- Updated 0452 GMT (1252 HKT)
"I'm proud of their moral standing," says Harvey Humphrey. His parents are accused of corporate crimes in China.
August 6, 2014 -- Updated 1942 GMT (0342 HKT)
A TV confession detailing a life of illegal gambling and paid-for sex has capped the dramatic fall of one of China's most high-profile social media celebrities.
July 31, 2014 -- Updated 0410 GMT (1210 HKT)
President Xi Jinping's campaign to punish corrupt Chinese officials has snared its biggest target -- where can the campaign go from here?
July 30, 2014 -- Updated 0712 GMT (1512 HKT)
All you need to know about the tainted meat produce that affects fast food restaurants across China, Hong Kong, and Japan.
July 18, 2014 -- Updated 0230 GMT (1030 HKT)
Some savvy individuals in China are claiming naming rights to valuable foreign brands. Here's how companies can combat them.
July 16, 2014 -- Updated 0911 GMT (1711 HKT)
Is the Chinese president a true reformist or merely a "dictator" in disguise? CNN's Beijing bureau chief Jaime FlorCruz dissects the leader's policies
July 8, 2014 -- Updated 0344 GMT (1144 HKT)
With a population of 1.3 billion, you'd think that there would be 11 people in China who are good enough to put up a fight on the football pitch.
ADVERTISEMENT