Mainland property investors pull back

HONG KONG: Mainland investors in Hong Kong's luxury housing market are pulling back to lick their wounds after feeling the impact of recent mainland measures to tighten credit and cool property prices.

Mainland buyers accounted for 13.4% of the second-hand luxury home market (defined as units valued at HK$10 million and above) in the first quarter of this year. This was a fall of 4.7 percentage points from 18.1% in the year-earlier period, according to data compiled by Centaline Property Agency.

However, in some districts favoured by mainlanders, the fall has been much bigger.

According to Centaline, mainland buying accounted for 53% of sales at Kowloon Tong's Mount Beacon in the secondary market, 50% in Harbourside, West Kowloon, and 41% in Cullinan at Kowloon Station.

"The number of mainland buyers has been falling since April," said Thomas Lee Pui-cheung, a regional sales director for Centaline in Kowloon Station and Tsim Sha Tsui.

In the first quarter, Centaline brokered about 80 to 100 luxury unit deals at Kowloon Station a month. Of this, more than 30 deals involved mainlanders. Transactions fell to 46 deals last month, of which mainland buyers accounted for about 20%.

Lee attributed the fall to the central government's latest measures to clamp down on credit and curb property price rises.

The measures have resulted in a drastic drop in sales volume in mainland cities. While home prices in 70 mainland cities still rose at the second-fastest pace on record last month, according to the National Bureau of Statistics, analysts expect to see a sharp drop in coming quarters.

Lee said before Beijing imposed the restrictions, many affluent mainland tourists came to Hong Kong to buy property. "They visited the units, bought them and left them vacant," he said. "Those wealthy buyers have vanished after liquidity tightened."

Without the support of mainlanders — the main driver of price growth in Hong Kong's luxury sector last year — home prices at Kowloon Station had fallen 5% to 8% since April, Lee said.

A 1,200 square foot unit at Sun Hung Kai Properties' Cullinan development sold for HK$18,000 per square foot in April but fell to HK$17,000 last month. No sales at Cullinan were recorded this month.

However, Lee said prices would not fall substantially, because supply of upmarket units remained limited.

There are still mainland buyers who hope to use their home purchases to join Hong Kong's capital investment entrant scheme, according to Lee. The HK$6.5 million investment required from each applicant to obtain Hong Kong residency can go into real estate or financial assets.

Lee said these investors would still come unless the central government continued to tighten liquidity.

Patrick Chow Moon-kit, head of property agent Ricacorp Properties' research team, said Ricacorp's deals indicated that the ratio of mainlanders buying luxury homes fell from 35% to below 20%.

He said some of these investors might consider industrial or office properties, as the Hong Kong government was also introducing measures to check the city's residential prices. — South China Morning Post