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Sales rise in Hong Kong residential market
Residential property sales in Hong Kong have increased, up 9.4% from August to September but officials are keeping tax policies in place to try to keep price growth under control. First hand transactions jumped 110%, while secondary sales declined 15%, month on month, according to the latest data from the Land Registry. Both demand and supply remained robust in the primary market, with around 360 units launched during the mid-autumn festival holiday, says the latest monthly Hong Kong property market report from international real estate firm Knight Frank. For example, 110 units in Century Link in Tung Chung and over 200 flats in Upper East in Hung Hom were snapped up within just a few hours. In contrast, the secondary market remained subdued last month, amid the recent stock market volatility, a potential interest rate rise in the United States and fierce competition from primary developments, the report points out. It also points out that the Chief Executive has announced that the stamp duty policies will remain in place in the near term. ‘We do not expect home prices to drop significantly,’ the report adds. Calculations by Knight Frank indicate that a 100-bps increase in mortgage rates will only result in a HK$500 increment in monthly instalment for every HK$1 million of mortgage loan, based on a 20 year repayment period. ‘Therefore, a minor interest rate hike is not expected to lead to a significant default risk. On the other hand, market views do not expect a drastic interest rate hike this year,’ it adds. Despite strong leasing demand, the Grade-A office market was stable last month amid limited available space, particularly in core business areas, the report also says. Most firms opted for renewing their leases rather than relocation due to a lack of alternatives. The key demand drivers remained Mainland Chinese firms, which continued to favour Central for setting up offices. As a result, Central’s vacancy rate dropped a further 0.2% point to an extremely low level of 1.4% in September, close to the historical low in 2008. An increasing trend of operation split was witnessed in the office market due to a lack of vacant space. Many firms have to split their operations into smaller offices located in different buildings. Previously, only major firms requiring large premises needed to split their offices, but now even firms requiring units of below 10,000 square feet are going for such arrangement. ‘With the tight supply and many offices under multiple offers, landlords have become more aggressive in asking rents. If the trend continues, it could be possible to see a reversed premium situation next year, firms requiring large office space have to pay an even higher per square foot rental,’ the report explains. ‘Looking ahead, given sustained demand and low vacancy rates, we remain positive towards the long term outlook for Grade-A offices in Hong Kong. We expect rents in Central to increase 10% this year and another 5% in 2016. In Kowloon… Continue reading
US housing market likely to see more pressure on prices
Housing starts in the United States rose in September, driven by the multifamily sector, but completions are not matching that hot pace, especially for lower end homes. With demand rising but supply in the form of completions slowing, there will be more pressure on home prices to rise, according to the latest analysis report from real estate firm CoreLogic. The implications are likely to be particularly felt at the low end of the property market due to the Federal Housing Administration’s decision in January to cut mortgage insurance premiums by 50 basis points, it points out. Overall starts are up 18% since last September, driven by multifamily, which saw strong growth of 29%, the data shows. Completions, though, the number of units actually delivered, rose by only 8% year on year, or less than half the jump in starts. Multifamily is the driver in this sector too, up 20% from September of last year. ‘The number that should give the market pause, though, is the completions on one-unit structures, both attached and detached. They are up only 3% and they are the most important segment to look at. They significantly lag the one unit structure starts number which were up 12% year on year,’ the report says. ‘Since it takes six months to deliver a house after ground breaking, completions is the actual new supply that is ready to be sold. What that means for home sales is definite upward pressure on home prices,’ it explained. The report also points out that since the FHA made its premium cut, the prices for lower end houses have jumped and the FHA is a big presence in the low end market where houses typically sold for 75% or less than the median. As of August, real prices for lower end houses have jumped 10.4% relative to a year ago. Prices for higher end homes have been up as well, but only half as high at 5.2%. The lower end prices, which had been up in a narrow range of around s7% the last half of last year, really took off starting in January. ‘The real trend to watch here is if one unit completions will rise to match what is a re-acceleration of demand on the low end. If demand for homes to buy outstrips supply, prices will inevitably rise even higher,’ the report concludes. Continue reading
Global property prices up 4.7% year on year led by Hong Kong, latest data shows
Global house prices have increased by a median of 4.7% year on year led by Hong Kong, Turkey, Ireland, Sweden and Australia, a new international report shows. Overall prices have increased in 21 of the 26 countries tracked by the Economist House Price Index but growth does vary from nation to nation. The growth is topped by Hong Kong with annual price growth of 20.8%, followed by Turkey with a rise of 18,8%, Ireland up 13.4%, Sweden up 10.3% and Australia up 7.5%. At the bottom end of the index the country with the biggest annual drop in property prices is Greece with a fall of 5.9%, Singapore down 3.7%, Italy down 3.3%, China down 2.4% and France down 2.3%. All other countries has seen annual price growth according to the index which measures national affordability by comparing prices to the long run average of their relationship with rents and income. In Hong Kong prices have now doubled in five years despite seven separate round of cooling measures being introduced but with little effect. The latest, in March this year, reduced the average loan to value ratio for new mortgages from 64% to just 52%. But the index report suggests that in practice it is China’s recent stock market crash is likely to be a bigger dampener on demand as mainland investors put off new purchases. Meanwhile, China’s own housing market, it is one of only five in the index where prices are falling, but the report points out that prices are falling at a slower rate than before. The government has been trying to boost the market over the past 10 months, cutting interest rates by 1.4% and relaxing rules on down payments. Prices are now rising on a monthly basis in many cities including Beijing and Shanghai. The report points out that in the United States annual growth of 4.7% shows the real estate market is well into recovery. Some cities are seeing strong growth such as San Francisco with prices up by 10% in the year to July and up by 75% since 2009. Other countries’ housing markets are already well above fair value and the report reckons that houses are more than 30% overvalued in six markets, including Canada and Australia, with the UK the most supply constrained of this group where demand is outstripping the number of properties coming to the market. It points out that in the UK although prices have risen by 35% since their trough in January 2009, house building is failing to respond. Just 140,000 homes were completed in the year to March 2014, some 25% below the long term norm. Continue reading
