According to a Jones Lang LaSalle report, residential sales in Hong Kong are down 16 percent year over year.

 

The Hong Kong residential market slowed in 2011, according to a new analysis released this week by global real estate firm Jones Lang LaSalle titled the Hong Kong Mid-Year Property Review. for sale

 

The government has imposed austerity measures over the last 12 months in order to better manage overheating concerns in the residential sales market. In 1H11, the combined impact of the Special Stamp Duty and the increased obstacles established for potential buyers by lower loan-to-value ratios resulted in a considerable decrease in sales market momentum.

 

During the period, a total of 55,200 residential sale-and-purchase agreements were registered, a 16 percent decrease from the previous year. However, compared to the levels seen in 2005, 2006, and 2008, an average of 9,200 transactions per month during the first half of 2011 is still deemed healthy (8,600, 6,800 and 8,000 transactions per month, respectively).

 

In the first half of 2011, a total of 1,260 preliminary transactions for properties worth HKD 20 million or more were registered, a decrease of 33% from the second half of 2010, despite an increase of 7% on a year-over-year basis. The total consideration for these deals was HKD 59.4 billion, down 20% from 2H10 but up 11% year-over-year. Despite a drop in sales volume, luxury residential property capital values grew 16.2 percent in the first half of 2011. Rents for luxury residential properties increased by 4.9 percent over the same time in the leasing market, owing mostly to continued leasing demand from corporate expats.

 

Capital values for mass residential properties increased by 10.1 percent in the first half of 2011, owing to the combined effects of rising household incomes, low holding costs, and a tight vacancy market environment. A drop in sales momentum, along with a supply shortage, has resulted in lower sales volume in the primary sales sector. A total of 4,700 new units were sold in the primary market in the first five months of 2011, compared to 13,600 units sold in the full year of 2010.

 

Despite the fact that the sales market has slowed, developers have continued to compete for greenfield sites. In 1H11, the government launched and sold eight residential sites for a total of HKD 20.4 billion. These sites, which are expected to be completed in 2015/2016, will have a total capacity of around 800 units.

 

'The latest round of loan-to-value ratio restrictions introduced in June led to a relatively quiet sales market towards the end of 1H11 as end-users and upgraders have increasing difficulty moving up the housing ladder and improving their living environment,' said Joseph Tsang, Managing Director of Jones Lang LaSalle Hong Kong. These policies are intended to decrease liquidity in the mass and medium home sales markets without having a significant impact on existing property owners. As a result, even though local rates for new mortgage loans have begun to rise in recent months, prices are unlikely to decline.'

 

"Looking ahead to the second half of 2011, we see certain market risks increasing, but not to dangerous levels. Despite a recent slight increase in effective mortgage rates, the low holding costs have remained. We estimate sales volume to stay low for the rest of 2011, owing to greater loan-to-value ratio restrictions and increased policy and macroeconomic risks, while rentals are projected to catch up as a result of some buy-to-lease shifts. There's also a slim likelihood that future supply would rebound until 2015/2016, giving capital values a boost for the time being."