Hong Kong Try to Cool Property Market

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Hong Kong Try to Cool Property Market

Post by Dennis Ng »

The Hong Kong government announced Friday new initiatives to curb soaring home prices including boosting land supply and restraining speculative activities by raising transaction costs, as the city faces the threat of asset bubbles forming.

The government will auction three development sites in Chai Wan on Hong Kong Island, Hung Hom in Kowloon and Fanling in the New Territories in the application list soon, regardless of whether developers table an offer, Financial Secretary John Tsang told reporters.

Under the government's application list system for land sale, a land auction will be triggered only when a developer offers no less than 80 percent of the minimum price required by the government for a lot on the list.

Two of these three sites would be auctioned in September, said Tsang, adding that some industrial sites would also be converted into residential sites later to cater to demand for smaller flats.

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Aside from increasing land supply, the government also unveiled new measures to curb speculative activities in the property market.

The government will ban the resale of first-hand uncompleted flats before initial transactions are completed.

In other words, purchasers – usually speculators – of those flats will need to complete the transaction by paying all transaction fees before they can resell those flats, a move that will increase their costs and therefore discourage them from speculating.

Also, the government will require that buyers of those flats forfeit 10 percent, instead of the current 5 percent, of the total purchase price if they cancel the transactions.

"Experience indicates when the property market heats up, a lot of speculative activities take place, which will hurt the stability of our financial system when hot money withdraws from the market," said Tsang.

Tsang said the government is determined to stabilize the city's property market and will not hesitate to introduce further measures which are proved necessary.

"These measures won't hurt those real home buyers, but to add costs to speculative activities in the market," he said.

The government has previously announced various measures to stabilize home prices including boosting land supply, curbing speculative activities in the market, enhancing transparency in the first-hand market, as well as preventing excessive expansion in mortgage lending.

However, home prices keep rising, supported by historically low mortgage rates and strong demand from mainland buyers. The city's home prices have soared over 40 percent since the beginning of 2009, with prices of some luxury apartments having surpassed record highs in 1997.

"Hong Kong's home prices are becoming unaffordable to the mass public as nowadays it takes an average household 46 years to earn enough for an average 500 square-foot home in the city," CLSA's property research head Nicole Wong told China Daily in an earlier interview.

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While Tsang admits home prices in some popular housing developments are approaching historical highs at a "rarely fast pace", he said he has yet to see any bubble in the market, calling all these tightening policies "preventive" measures.

"There is an increased risk of a property bubble forming because interest rates are expected to stay low for some time," he said.

"Flat prices are determined by the market. The government does not have a target for home prices," Tsang said.

Tsang warned home buyers to be cautious when borrowing money to purchase property, as their repayment burden will soar when interest rates return to a normal level
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Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
Dennis Ng
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Posts: 9781
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Post by Dennis Ng »

Singapore has long been regarded as a safe investment haven, which is why foreigners are snapping up property throughout the island.

Foreigners have bought around 23,000 non-landed private homes since 2007, 35 percent of which are high-end homes in Districts 1, 2, 4, 9, 10 and 11, according to the URA’s record of caveats lodged.

However, the high-end apartments sector still has chances for growth if trends in other cities are anything to go by.

According to data from Savills, the average price of high-end apartments stood at $2,154 psf in Q2 and $3,055 psf for super luxury private homes – a subset of high-end homes that reached an average of $2,500 psf in Q4 2006.

Prices for high-end residences in Hong Kong in Q2 were 20 percent higher than those in Singapore, reaching HK$14,520 (S$2,570) psf. The actual price disparity could even be bigger as common spaces such as corridors are considered in computing unit prices in Hong Kong.

Apartment prices in Sydney are approximately 28 percent higher compared to Singapore’s, while prices in London are 41 percent higher.

While prices in two of China's major cities are lower, there was still a 15 percent increase in Beijing and a 32 percent rise in Shanghai last year, which are both at record levels, marginalising any possible short-term capital gains.

Singapore’s high-end market is the only sector where prices remain below earlier peaks. High-end apartment prices are 11 percent below record levels achieved in Q4 2007, while prices of super luxury units are 17 percent cheaper.

Prices of mass market homes in May were 15 percent higher over the earlier peaks, while mid-tier apartments were five percent up. As positive economic prospects for Singapore are expected to continue into H2 2010, high-end apartment prices are likely to reach earlier peak levels by early 2011.

Many East Asian investors may also shift their funds to Singapore due to the increasing anxiety over bubble risks and fears of additional tightening measures that threaten to derail prices.

China’s central government implemented 11 cooling measures earlier this year, which helped new homes sales to drop 60 percent to 70 percent in Shenzhen, Shanghai and Beijing in May.

Consequently, more foreign buyers, particularly mainland Chinese, have flocked to Singapore, sometimes buying in full cash, with the Chinese replacing Malaysians as the No. 2 buyers of super luxury homes priced from $5 million and above.

The increasing number of millionaire Singaporeans and high net worth individuals could also see a growing demand for luxury homes.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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