Prices and sales both likely to drop, says CBRE

HONG KONG: The market for Hong Kong homes has reached a turning point, with prices and transaction volumes both likely to see corrections, says property consultant CB Richard Ellis (CBRE).

"It is difficult to predict... but in general, we expect to see a correction of 5% to 10% in residential prices over the next 6 to 12 months," CBRE's head of Hong Kong research, Edward Farrelly, said. "If sentiment continues to weaken, a correction of up to 20% would not be surprising."

The caution echoes the views of several analysts who have warned that the market has reached the end of an 18-month up cycle against the backdrop of extreme volatility on global financial markets. Last week's poorer-than-expected land-auction result signalled the turning point, they say.

Property prices have risen sharply in the past 18 months. The average price for luxury flats reached HK$27,500 (RM10,539.88) per square foot in the second quarter of this year, among the highest in the world, CBRE said in its new Global Market View report.

But the latest property market curbs announced by the government caused sales to decline. According to Ricacorp Properties, only 146 homes sold on the secondary market in the week from June 27 to July 3, shortly after the government's announcement. Sales had since begun to recover, with 194 during the week from Aug 8-14 — but this compares with weekly sales of 670 from January 10 to 16, the strongest week this year.

While forecasting a short-term correction, CBRE's Farrelly said that, given the low-interest-rate environment, it seemed unlikely that the correction in values now under way would result in many forced sales. In the medium term, the outlook remained positive, given the strong fundamentals of the Hong Kong and wider Asia-Pacific markets.

In the circumstances, Farrelly expects any drop in prices to be recouped within a comparatively short period following a return to a more positive overall economic outlook. — SCMP