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Hong Kong property watchers turn bullish as home prices hit record high
July 8, 2014 / 8:37 AM / 3 years ago

Hong Kong property watchers turn bullish as home prices hit record high

* Home prices for May reach record high - government data

* Market sentiment rises as end-user demand picks up

* Property agencies raise 2014 residential price forecasts

By Yimou Lee

HONG KONG, July 8 (Reuters) - Industry watchers have turned more bullish on Hong Kong’s property sector after home prices hit a record high with several real estate agents raising their forecasts for residential prices in 2014.

Hong Kong’s home prices for May hit a record high with small and medium-sized units posting the biggest increases, official data showed, after the government eased property curbs in May to give residents who wish to upgrade more time to sell their old homes.

Strong pent-up demand from end-users, who are exempt from a series of cooling measures to rein in sky-high prices, is also heating up the once-quiet market, with overall property transactions reaching a 16-month high in June.

“The positive response to these new launches was due to a combination of developers setting prices largely in line with secondary home prices nearby and by offering an array of discounts and incentives,” said Joseph Tsang, managing director at property consultancy, Jones Lang LaSalle.

The group forecast on Tuesday that prices of mass residential properties may stay steady or drop 5 percent in 2014, compared with estimates made last year for a 15 percent plunge.

Centaline Property Agency in Hong Kong said it expects home prices to rise 6 percent from lows in February to hit record highs in the third quarter. Last year, it forecast a 5 percent drop in prices in 2014.

Hong Kong property transactions fell to a 17-year low last year due to a surge in sales tax.

The city’s real estate sub-index has risen more than 17 percent since lows hit in March and is now hovering near its highest level since November last year.

Shares of Cheung Kong Holdings, controlled by billionaire Li Ka-shing, have jumped more than 34 percent since lows in February, while shares of the city’s largest developer, Sun Hung Kai Properties, have risen more than 18 percent since March.

Some attribute the improved sentiment to recent capital market activity, while others said speculation of further easing from the government helped boost the market.

Hong Kong’s chief executive, Leung Chun-ying, said in April that the property market, which has seen prices jump nearly 120 percent since 2008, is no longer “overheated”.

But investment banks, which were among the first to forecast a sharp correction in home prices, remained cautious.

Barclays property analyst Paul Louie maintained a forecast for a 30 percent plunge by the end of 2015, citing low housing affordability and an expected interest rate hike, which could lead to a collapse in Hong Kong’s property market.

“The question is can we continue to sustain this type of volume for the next one or two years,” said Louie, referring to the recent demand in the new home market. “We still think home prices are very unaffordable in Hong Kong and we continue to look for a 30 percent correct by the end of 2015.”

Jason Ching, property analyst at Deutsche Bank, maintained his forecast for a 15 percent drop in prices this year.

“Once the pent-up demand gets exhausted, things should return to normal because the economy is an issue, new supply is on the rise and the rate hike is coming closer,” Ching said.

Editing by Matt Driskill

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