Sales and property prices expectation hit by stamp duty change in Hong Kong
Sales and price expectations in the residential property market in Hong Kong have fallen after recording a 16 month high last October, according to the latest survey report.
The residential market survey from the Royal Institution of Chartered Surveyors shows that sentiment surrounding the housing market dropped sharply after the Government raised stamp duty on residential purchases to 15% in November.
However, the downbeat expectations have yet to dampen prices, with a net balance of 58% of contributors reporting a rise in prices over the past three months.
But the outlook is not quite so rosy. Over the next three months, a net balance of 33% and 5% of respondents expect sales and prices to contract, respectively. Similarly, a balance of 16% and 1% expect a drop in sales and prices over the next year.
Sentiment was particularly downbeat among respondents on Hong Kong Island, where a balance of 50% and 20% expect sales and prices to decrease over the next 12 months, respectively.
Buyer enquiries were also down substantially, led by a sharp contraction in enquiries on Hong Kong Island while those in the New Territories were flat. Demand from mainland Chinese helped offset some of the fall in demand, as a majority of respondents in Kowloon and on Hong Kong Island reported an increase from these buyers, and only a slight majority in the New Territories reported a decrease.
The RICS survey report says that tighter supply should also provide some short term respite for prices, as a majority of contributors in all regions reported a contraction in instructions to sell.
‘The sentiment indicates that short term effects of the increase in stamp duty will be similar to that following past cooling measures introduced by the Hong Kong government in 2010, 2012, and 2013,’ the report says.
‘Volumes and values fell sharply following the introduction of past cooling measures in both primary and secondary markets and the weakness generally persisted for three to six months. In line with this, agreed sales contracted in November, with 33% more respondents reporting a pullback rather than an increase,’ it adds.
It was the first time a majority of respondents reported a decline since May 2016 and the report explains that although credit conditions were unchanged across all regions in November, respondents are now expecting some tightness in the coming months.
Also, a narrow majority of respondents now expect credit conditions to tighten over the next three months after expecting an easing in credit conditions in the October survey.
The lettings market was relatively unaffected by the increase in the stamp duty. Demand was robust across all regions, and particularly strong on Hong Kong Island.
A balance of 52% of contributors reported an increase in headline tenant demand, while 28% reported an increase in the supply of properties. Headline rents are seen up 2.3% over the next year, based on a trailing three month average, slightly down from the 3.2% forecast in October’s survey.