Yearender: HK property market hard to cool down

Signs have shown that Hong Kong' s red-hot property market won't be easily cooling down although the city government has taken a series of measures to this effect.

According to Chief Executive CY Leung, property prices in Hong Kong have continued to rise by such an extent that they are beyond the citizens' affordability.

Meanwhile, Buggle Lau, chief analyst for Midland Realty, one of Hong Kong's largest real estate companies, said, "The prices for residential flats in Hong Kong surged about 20 percent this year."

GOV'T EFFORTS OFFSET BY AFFLUENT LIQUIDITY

To curb speculation in the residential property market, the city's government raised the duty rates and extended the coverage period in respect of an existing Special Stamp Duty (SSD), and at the same time introduced a 15 percent additional stamp duty called Buyer's Stamp Duty (BSD) on residential properties acquired by any person except Hong Kong permanent residents from late October.

The government emphasized that such measures have cooled down the exuberant property market. Augustine H.M. Wong, executive director of Henderson Land Development Company Limited, also said these measures are effective as transaction volume of residential property has apparently decreased.

According to Hong Kong's Land Registry, the number of Sale and Purchase Agreements of residential building units received for registration in November fell about 20 percent compared with October.

Nevertheless, Credit Suisse Group questioned the effect of these measures.

"We do not think these measures address the real underlying forces that are pushing up home prices now, which we think are an attractive rental yield and the urge to preserve capital in a QE world," Christiaan Tuntono, research analyst of Credit Suisse, said in a report.

The fact is that the house prices in Hong Kong haven't declined dramatically.

Actually, Hong Kong property investors have found new places to park their money.

"Parking spaces have become a new hot item," chief analyst Lau said. Investors are increasingly turning their attention to commercial property such as parking spaces, because the SSD and BSD don't cover nonresidential properties, he added.

The current average prices for parking spaces were near the peak levels seen in 1997, said Wong Leung-sing, senior associate director of the Research Department at Centaline Property Agency, another big Hong Kong property business.

Lau cautioned against casual investment in parking spaces, saying that once the economy slows, the first thing people do is to sell their cars, and therefore they have no need for a parking space.