Authorities have announced new measures in a bid to cool Hong Kong’s overheating property market New cooling measures have been unveiled in Hong Kong after the finance minister warned that an asset bubble was forming in the city, reported channelnewsasia. The new measures became effective on February 23. The cost of property in Hong Kong has dramatically increased in recent years as a result of the low interest rate environment and a strong demand for property from investors in mainland China. The government introduced several cooling measures in October 2012, including a bid to restrict the number of non-local buyers with a 15 percent property tax on overseas investors. Despite such measures, the price of property has continued to rise. “The risk of an asset bubble is increasing,” said John Tsang, finance minister. According to Tsang, the price of residential property has increased by approximately 120 percent since 2008, while the cost of commercial property has also rocketed. Hong Kong will double the stamp duty to as high as 8.5 percent of property value for certain transactions, unless buyers are first time homeowners and permanent residents of the city. The new stamp duty will be applied to all property transactions, instead of just residential transactions as was previously the case. The loan-to-value ratio for commercial properties will be decreased by 10 percentage points for all borrowers, down to 40 percent for locals and 30 percent for non local buyers. “Maintaining a healthy, stable property market will be our ongoing endeavour. We shall continue to monitor the market closely and I will not hesitate to introduce further measures when necessary,” said Tsang. Tsang also encouraged buyers to be cautious before entering the market, according to Today. “We think the market is very exuberant right now. We want people to really step back and think about what they are doing before they go into the market,” he said. Previous cooling measures in the residential sector have attracted investors towards alternative real estate markets, such as hotel rooms, car parks and offices as opposed to the more traditional markets. Tackling the housing crisis is a high priority, according to Leung Chun-ying, Hong Kong’s leader. Leung also vowed to increase land supply to increase the number of new homes being built. Many people expect property investment to remain strong, providing the United States Federal Reserve continues to accommodate low interest rates, reported Today. The overheating property market poses a great risk to Hong Kong’s economic security, as surging prices could lead to an abrupt correction, according to Norman Chan, Hong Kong Monetary Authority Chief. “Hong Kong is facing risks no lesser than those experiences during 1997,” he commented.
Malaysia is tipped to become the next hot spot for foreign investors as costs in Singapore and Hong Kong markets increase Malaysia’s property market is expected to receive an influx of foreign investors who want to avoid high taxes in Singapore and Hong Kong, reported Global Property Guide. Analysts based in Kuala Lumpur are optimistic that Malaysia will become a new hot spot for overseas investors due to newly imposed higher levies on properties in Hong Kong and Singapore. Residential areas in Kuala Lumpur, Kota Kinabalu, Iskandar and Penang are already viewed as feasible investment destinations for Singaporeans in particular, according to Malaysiainsider.com. In a survey by iProperty.com 2,099 respondents from Singapore, Britain and Australia ranked Malaysia as the next top preference for overseas investment. Singapore’s commitment to Malaysia was indicated by one company’s investment in a mixed-wellness leisure development recently launched in Iskandar Malaysia. The Singaporean dollar’s strength against the Malaysian ringgit may also help spur investors to direct their funds towards Malaysia.
Developers in Hong Kong have regained confidence in the market Hong Kong’s residential property sales market bounced back last month as demand for property continued to outstrip supply, according to analysis by Knight Frank. Transactions were up 65.2 percent month-on-month, and sales volume for homes worth over HK$10 million (US$1.28 million) increased 57.7 percent, reported Property Wire. The recent Policy Address made by Hong Kong’s chief executive put forth numerous measures regarding land and housing planning, aimed at increasing future supply of private and public housing. Even though long term housing policy is moving in the right direction, new supply will not be available until 2015 or 2016 at the earliest, according to Thomas Lam, director and head of research for Knight Frank Greater China. “In the short term, demand will continue to outstrip supply, but the government may introduce further tightening measures should home prices surge again. Therefore, home prices are set to remain stable with upward or downward movements within five percent this year,” he said. Transactions in the residential sector are expected to slow down this month during the Chinese New Year celebrations, however, an additional rebound is anticipated from the end of February once the negative impact of recent cooling measures has petered out, according to Knight Frank. Developers have regained confidence in the market and have been more active in launching primary projects, reported Property Wire. The Upper West project in Tai Kok Tsui by Kowloon Development was released at market prices and received a positive response. Other developers in Hong Kong re-launched unsold projects to take advantage of growing purchasing power. Knight Frank anticipated a surge in supply following the New Year, with new projects like Imperial KENNEDY, Residence 88, The Grace and DUNBAR PLACE are scheduled to launch. The outlook in the secondary sales market has also shown signs of improvement, with record breaking transactions being registered, according to Lam. Taikoo Shing achieved the record price of HK$20,000 (US$2,579) per sq ft on saleable area. Some landlords are also becoming more assertive in their asking prices and are unwilling to sell their properties at discounted rates. As a result, fewer units are available and transaction prices have increased.
October’s tightening measures included the increase of the Special Stamp Duty and the introduction of a 15 percent Buyer’s Stamp Duty The number of transactions this year on Hong Kong’s property market is likely to be limited by the imposition of government measures on the market, according to a recent report by property management firm Jones Lang La Salle. Tightening measures introduced by the government in October included the increase of the Special Stamp Duty rate range from five to 15 percent of transaction value, to 10 to 20 percent. The restriction period on the resale of residential properties was increased from two years to three and a 15 percent Buyer’s Stamp Duty on company and non-local buyers was introduced. Jones Lang LaSalle expects transaction volumes in 2013 to be limited by the lack of available stock in the market, as owners hold onto properties amid the low interest rate environment and greater entry costs. However, the effect of the latest round of tightening measures on capital values should be limited, according to the report, and limited supply in the high end of the market and luxury residential capital values should continue to be supported. Jones Lang LaSalle predicts luxury home prices to grow by approximately five percent this year. The expectation of an improved economy in 2013 should also translate into higher demand for leasing properties, and boost growth in the rental sector by around five percent. The introduction of the latest restrictive measures last year lowered market sentiment and contributed to a fall in transaction volumes in the residential sales market, according to Jones Lang LaSalle. The number of residential sale and purchase agreements (ASPs) fell by 53.3 percent month-on-month to 3,286 transactions, according to figures released in December which reflected November’s sales. Q42012 recorded a total of 19,035 ASPs, down 9.8 percent quarter-on-quarter. The government’s tightening measures also had an impact on purchasing demand, and market response to new launches was slow, according to research. At the end of Q42012, fewer than 20 percent of units at The Reach, a joint venture development by Henderson Land and New World Development, had been sold. Only 25 percent of units in Cheung Kong’s One West Kowloon development had sold by the end of the quarter. The luxury residential market remained sluggish throughout Q42012, and preliminary statistics showed that only 81 properties priced above HK$50 million (US$6.4 million) were sold during the period. This is down eight percent quarter-on-quarter and 14.7 percent year-on-year, reported Jones Lang LaSalle. Weak demand for leasing properties in the luxury sector weighed on rents during the period, though demand and rents for mid-luxury properties remained fixed. In terms of supply, four luxury projects comprising a combined total of 17 units were scheduled for completion in Q42012. Capital values in the luxury sector held up reasonably well, dropping slightly by 0.1 percent quarter-on-quarter in Q42012, according to the report. However, luxury property rents continued to decline as a result of feeble demand, down by 1.7 percent quarter-on-quarter.
Hong Kong’s property market is already recovering despite tightening measures introduced last October The property market in Hong Kong has adapted quickly to the tightening measures enforced by authorities last October, according to property consultancy firm Savills. The implementation of the Buyers’ Stamp Duty (BSD) and the changes to the Special Stamp Duty (SSD) had a negative effect on market outlooks, reported Savills. Savills reported that developers adopted a wait-and-see approach after the introduction of October’s tightening measures, and deferred the launch of any new projects while they observed the effects of the newly introduced stamp duties. At 15 percent of the market value of residential properties, the BSD reduced mainland purchasing. Rising concern over policy risk in the market, combined with effects of the low season in Q4 caused a loss of confidence in some owners who decided to sell their properties at a discounted price. As a result prices fell five percent immediately after the new measures came into effect. However, Hong Kong’s low interest rate environment, a robust local economy and a limited supply of housing will regulate the possible downward trajectory of prices in the short term, according to Savills. In the luxury property sector, the number of transactions fell in Q3 and Q4 2012 due to weaker confidence and developers’ reluctance to launch new projects. Despite this, the number of transactions in the luxury sector in Q3 and Q4 still increased 75 percent year-on-year. The Policy Address 2013 made by the Hong Kong’s authorities proposed a string of measures to increase public and private flat supply. However, the low supply of flats in both segments will be difficult to alter in the near future, according to Savills. “While the recent Policy Address promised more supply-side measures, in the near term price pressures remain,” said Simon Smith of Savills Research. Savills expects Hong Kong’s property market to recover in Q1 2013 as it adapts to the new stamp duties and the market enters its peak season. According to Savills’ report, a drop in prices is unlikely unless new tightening measures are introduced, as demand for property remains strong.
Property prices in Hong Kong have reached a record high despite five previous rounds of tightening measures The Hong Kong Monetary Authority is poised to introduce its sixth round of mortgage tightening measures since 2009. According to the South China Morning Post, the authority has given its strongest warning yet of a bubble in the property market. “The overheating property market remains the biggest risk factor to the stability of the Hong Kong economy,” said Norman Chan Tak-lam, chief executive of the authority. Household debt reached a record high of 60 percent of GDP in 2012 and was close to 59 percent in Q4, according to Chan. The previous five rounds of mortgage tightening measures and tax measures, including those introduced in October 2012, have failed to cool the market. Prices have shown signs of growth despite a fall in the number of sales and mortgage applications. Property prices have recovered from the introduction of a new buyers’ stamp duty (BSD) on October 27 last year and are now back at a record high, according to Macquarie Securities. Prices fell by 1.6 percent after the new BSD was introduced. The Centa-City Leading Index rose 0.63 percent week-on-week to a record high of 119.13 on February 1. The index tracks home prices in 100 housing estates in the secondary market, with its benchmark reflecting prices in July 1997. Property prices in Hong Kong are increasing due to a lack of supply and continued overseas investment, according to Chan. The US and Japan are among countries that have introduced monetary easing policies to boost their economies. “These monetary easing measures have caused inflation problems in Asia and have added uncertainties to the markets and economy in Hong Kong,” said Chan. Current interest rates in Hong Kong are close to zero, and could go up at any time, according to Chan. “If the interest rate rises, some borrowers may have difficulty repaying their mortgage and that would add to risks faced by the banks.”
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