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Property prices in Hong Kong predicted to fall 10% in 2012

‘Most people are on the sideline. They are watching. They are waiting. In order for activities to go up, prices may have to come down to drive a little bit more interest,’ said Benjamin Hung, chief executive officer in Hong Kong.

Hong Kong property prices fell to a six month low in early November while the number of transactions the previous month fell to nearly a three year low, after the government increased minimum down payment requirements and increased land sales to curb a housing bubble.
However, some think prices may fall even further. According to Andrew Lawrence, head of property sector research at Barclays Capital Asia, they could drop as much as 30% by 2013.

The government’s property curbs came after prices increased rapidly, more than 70% since early 2009. They surge was fuelled by record low mortgage rates, a shortage of new housing supply and an influx of buyers from other parts of China.

The Hong Kong Monetary Authority, the city’s de-facto central bank, has asked lenders to keep more reserves as part of their counter cyclical measures, according to chief executive Norman Chan. He said that loan growth may slow next year on lower mortgage lending.

Prices have fallen by 4% from their peak in June, according to an index compiled by Centaline Property Agency, the city’s biggest privately held realtor. The number of home deals in November fell 64% from a year earlier, according to Land Registry figures.

Yu Kan-hung, a senior managing director at CBRE in Hong Kong said that prices will probably fall 10% next year before transactions return to a more normal level of around 8,000 to 10,000 deals a month.

The number of home sales has dropped to below 5,500 a month from July to November, according to Land Registry figures.

‘Lower transactions combined with a not significant adjustment in the property price suggest that people are watching. I don’t think there’re a lot of desperate sales,’ said Hung.