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HONG KONG: The property sector in Hong Kong looks set for a rough ride ahead. Home prices are expected to decline by 20 to 30 per cent over the next half year as buyers stay out amid the current global economic slowdown.
The window-displays at Hong Kong property agencies these days are filled with price cuts and other incentives.
Until recently, 10 to 12,000 units changed hands each month. But in October, that number dropped by 50 per cent. Thousands of property agents have also fallen under the axe.
Buggle Lau, chief analyst, Midland Realty, said: "This time is much different. You are talking about a global economic slowdown. Compared to 96/97, after the financial crisis, I think in terms of the macro-economy, I would say that it is worse than '97 because '97 was confined to Asia."
Average home prices in Hong Kong fell some 70 per cent in the wake of the Asian financial crisis in the late 1990s.
Some market-watchers said they do not expect the decline to be so sharp this time around. The supply situation today is very different compared to 1997, with 12,000 units in the pipeline compared to over 80,000 previously.
Still, for those who are looking to buy, getting the loan may be a bigger problem now.
Mr Lau added: "Property prices on average in the secondary market have corrected by about 15 per cent so far over the past months. Some home-buyers also find the price attractive and would like to purchase a property. However, it's difficult to secure a bank loan."
The luxury sector is expected to be the hardest hit. Units at the Residence Bel-Air, a popular high-end development in Pokfulam, are now being offered at a 40 per cent discount to their peak in the first quarter.
And a house in Victoria Peak, the island's most prestigious address, is selling for less than half of its US$24 million price tag.
Nicholas Brooke, chairman, Professional Property Services, said: "In the lead-up to last year, 30 to 40 per cent of purchases were being made by traders, speculators, so I don't think that lessons have been learnt at the top end.
"I think people have been more conservative on the mass market. We haven't seen the speculation in the mass market, that's why I think the correction will be a gradual one, whereas the correction will be quite sharp in the luxury sector."
The current market correction has ended the Hong Kong property boom that began after SARS in 2003. But with the looming threat of a global recession upon Asia, no one is yet able to predict a bottom for the Hong Kong property market. - CNA/vm
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