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Hong Kong new home supplies hit 16-year high with sales cooling down

The world’s most expensive real estate market is witnessing home supplies surging to the highest in 16 years, adding more pressure on its home prices amid hiking interest rates.

Hong Kong saw 33 residential property projects with 16,819 apartments have applied for authority approval for sales in August, increasing 9.57 per cent from 15,342 units in July, according to data released by Hong Kong’s Land Department last week. That’s highest amount since October 2002.

Local property developers have been accelerating land supplies after Hong Kong government in June released a vacancy tax on property developers who hoard empty, unsold flats, which amounts to about 5 per cent of the value of every property. In addition, in the renewed regulation for land sales approval, developers are required to sell no less than 20 per cent of the total homes in each property projects.

Escalating China-US trade tensions and tightening measures to curb the overheating real estate market has put many potential home buyer in a stay-and-see mode, leading to a cooldown in home sales, said Wong Leung-sing, associate director of research at Centaline Property.

Some analysts say, as home supplies increase, Hong Kong’s real estate market will be more dominated by new home sales, to squeeze second-hand home sales to some extent. Combined with the fact that the local government is expected to keep restrictions in place for some while, it reduced current homeowners’ desire to sell homes, reducing second-home supplies and keep the prices high.

While home supplies are set to rise, home sales have been on the decline.

Home sales declined 20.8 per cent month-on-month in August to 4,822 units, a new low in five months, and the total value of the sales plunged 28.3 per cent from the previous month, according to data released by the Land Registry of the city.

For a breakdown, new home sales dropped 15.2 per cent in August from the previous month to 1474 units, the sales value plunged 48.2 per cent to HK$18.04 billion, both hitting the lowest in three months, according to data compiled by the Centreline Property.

Sales of second-hand homes and the values slid 23.5 per cent and 25.8 per cent respectively to 3085 units and HK$26.85 billion yuan, ending 4–month streak avon 4,000 mark,  hitting the lowest level in 11 months and 5 months respectively, shows the data.

The Centa-City Index compiled by the Centaline Property Agency shows that the city’s average home price remained at the third highest on record as of 7th September. The index ended 7-week rising streak one month after the city introduced new restrictive measures on the real estate sector.

Residential home price index increased 0.82 per cent in July compared with one month earlier, having narrowed form a 1.85 per cent increase in June, the slowest growth since September 2017, according to a recent report released by the city’s Rating and Valuation Department.

Several investment banks have forecasted that the city’s home price will decline. The CLSA expects home prices in Hong Kong to decline 15 per cent within a year as the price level is becoming increasingly unaffordable for average citizens and home buyings are dampened by surging interest rates, slowing economy and depreciating Chinese yuan.

Nomura Securities earlier this month also said home prices will decline as banks have started to raise mortgage interest rates. UBS and Citibank predicted 10 per cent and 7 per cent declines by the end of 2019.

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