Price tightening policies expected to continue in China and Hong Kong in 2013

Global economic uncertainty, slow expansion in local economies and the continual effect of tightening policies are the key issues likely to impact the mainland China and Hong Kong property markets in 2013.

Residential prices in both Mainland China and Hong Kong are expected to experience mild movements in 2013, according to the latest joint market update from Knight Frank China and Holdways.

In October, the Hong Kong government introduced a new buyers stamp duty tax and also extended the existing special stamp duty but neither have affected prices which are still growing although transactions have fallen.

‘Demand from speculators and investors is expected to be checked by the increased policy risks and investment costs. This will be particularly apparent for primary residential projects, where a significant proportion of buyers are companies or mainlanders,’ said Thomas Lam Ho Man, head of research at Knight Frank in Greater China.

The number of residential transactions totaled 71,012 in the first ten months of 2012, but is expected to drop over 10% to only 75,000 in the whole of 2012, compared with 84,442 transactions over 2011.

However, with low interest rates and strong financial conditions, landlords and developers are not expected to offer significant price cuts. Residential prices are set to remain stable in 2013, with mild upward or downward movements of less than 5%.

On the mainland, where all eyes are on the March 2013 handover of power, property analysts are waiting to see whether the new leadership continues with the current property cooling measures, given the slowdown.

Helen Liu, general manager at Beijing Holdways Information and Technology, expects the government to continue with its determination to curb the residential property market.

‘However, residential transaction volumes have started to rebound since the second half of 2012, due to strong end-user demand. They are expected to rise 30% year on year in 2012 and grow another 15% year on year in 2013,’ she said.
‘Home prices have also started to experience mild rebound. We expect home prices in first tier cities, such as Beijing and Shanghai, to further growth by less than 5% in 2013, while those in second and third tier cities could be under downward pressure,’ she added.