The continuous supply of new homes and the potential United States interest rate hike are expected to slow residential price growth in Hong Kong during 2016, while the housing market in mainland China is expected to improve further under favourable government policies.
At a recent press conference in Hong Kong, real estate firm Knight Frank presented its forecasts for the important Asian property markets for 2016.
In mainland China, the residential market started to improve from the first quarter of 2015 following Government stimulus measures being introduced. During October 2015, 27 cities recorded month-on-month home price increases compared with zero just one year ago.
Home prices in first-tier cities in particular recorded strong growth, with Shenzhen seeing the fastest year-on-year home price increase in October, followed by Shanghai, Beijing and Guangzhou.
David Ji, Director, Head of Research & Consultancy, Greater China at Knight Frank, is optimistic about the outlook for the Mainland Chinese property market as housing inventory lowers and completion levels stabilise.
Meanwhile the best-performing cities are expected to be among the first-tier cities. Cities along the “One Belt One Road” route, in particular, are also likely to see promising development benefitting from policy support. He said he expected mass residential prices in first-tier cities to increase by between 5 percent and 8 percent during 2016 due to solid demand, while mass residential prices in second-tier cities will increase by between 1 percent and 4 percent.
In Hong Kong, while Government’s cooling measures are still in place a potential U.S. interest-rate hike and abundant housing supply in the pipeline have prompted potential buyers to adopt a wait-and-see approach. This has led to subdued property sales transaction in recent months. Knight Frank expects total home sales volume for 2015 to reach around 55,000, down 14 percent from 2014.
Only one major property market measure was introduced in 2015, namely the lowering of LTV ratio for self-use homes under HK$ 7 million in February. With a lifted down-payment ratio, even more homebuyers have shifted to the low-price segment of the market, below HK$ 10 million per unit, took up about 70percent of total sales. In terms of the size of transacted units, more than 70 percent of units sold in the past year were below 600 sq ft.
A number of buyers have also shifted to the primary market, attracted by competitive prices and preferential packages offered by developers. Therefore, the proportion of primary deals reached 27 percent during the first nine months of 2015, compared with only 10 percent in 2010.
Thomas Lam, Senior Director, Head of Valuation & Consultancy, Knight Frank expects the trend to continue in 2016.
While local buyers are moving to the low-price segment, mainland buyers, in contrast, shifted towards the super-luxury segment of the market despite the on-going Buyers Stamp Duty. During the first ten months of 2015, buyers of four out of the top 10 luxury deals were from mainland China.
Looking ahead, Knight Frank said there will be around 110,000 new homes supplied from 2016 to 2020, representing about 22,000 units per year on average. The supply will focus on the New Territories, followed by Kowloon, while Hong Kong Island (about 10 percent) will see limited supply. In the New Territories, the main body of the supply will cluster in Yuen Long and Tseung Kwan O, while in Kowloon, the supply will concentrate in Kai Tak.
