Hong Kong home sales fall to two-year low on curbs, rates

Hong Kong home sales fell to the lowest volume in more than two years last month as government curbs and rising mortgage rates sapped demand after a price surge since 2009.

The number of units that changed hands last month declined 37.6 per cent from a year earlier to 7,635, according to The Land Registry. That is the lowest since March 2009, according to data compiled by Bloomberg. The value of transactions slid 26.8 per cent from a year earlier to HK$39 billion ($6.17 billion), the biggest yearly drop since June last year, according to the registry.

Housing prices in the city, ranked the world’s most expensive place to buy a home by Savills, have gained more than 55 per cent in the past two years on record-low mortgage rates and an influx of buyers from China.

The government in November increased property transaction taxes and pledged to boost land supply amid public protests that housing prices are becoming unaffordable and as the central bank warned about the risk of a “credit-fuelled property bubble”.

“Sentiment has clearly been waning since February,” said Mr Buggle Lau, chief analyst at Midland Holdings, Hong Kong’s biggest publicly traded realtor.

“A slowdown is almost inevitable when there’s a combination of government curbs, mortgage rate hikes and unpredictable events”, including the earthquake and tsunami in Japan on March 11.

Hong Kong’s bank interest rates will rise on loan demand and capital outflows when the United States increases borrowing costs, Hong Kong Monetary Authority head Norman Chan said last month.

Some of the city’s biggest lenders, including Standard Chartered and BOC Hong Kong, raised mortgage rates after the warning from the city’s de-facto central bank, which is prevented by Hong Kong’s currency peg to the US dollar from raising interest rates.

On the supply side, Hong Kong may auction as many as 52 plots of land this year, financial secretary John Tsang had said in his Feb 23 Budget speech. The land could yield 16,000 units, almost 80 per cent more than from land sold last year.

The Hang Seng Property Index, which tracks seven of the city’s biggest developers, yesterday fell 0.2 per cent at the close in Hong Kong, its seventh straight day of decline. The index has lost 4.3 per cent this year, compared with the 1-per-cent gain in the benchmark Hang Seng Index.

Source : Today – 6 May 2011

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