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New transactions down by half, but prices stay firm

Hong Kong's secondary residential property market took the hardest hit from the new round of cooling measures introduced last month, with transactions falling by more than 50 percent, although prices have refused to budge.

The sluggish demand came after the Hong Kong Monetary Authority (HKMA) last month required banks to lower the maximum loan-to-value ratio to 60 percent for self-use residential properties priced at below HK$7 million. The move has effectively raised the down payment of mortgage loans on most small- to medium-sized apartments.

"The secondary market has been very quiet since the new measure came into force, and we're seeing more potential buyers staying away from the market, at least, temporarily," said Sammy Po Siu-ming, chief executive officer of the residential department of Midland Realty.

"Some buyers are expecting more room for negotiation with the landlords," he said. But, so far, many property owners have chosen to withdraw their properties, especially those in the urban districts, from the market rather than lowering prices to make a sale, he added.

The situation in suburban areas is different, real estate agents said. For instance, an apartment at Kingswood Villas in Yuen Long in the New Territories was put up for sale at a HK$300,000 discount to the market price. It was sold at HK$4.04 million. But, such cases are few, as most landlords would rather wait for better market conditions, agents said. "Many landlords would rather rent their properties out than selling them at reduced prices," Po said.

Meanwhile, the primary market for newly developed properties has largely shrugged off the new financial constrain imposed by the HKMA, with some help from quick-minded developers, who have found a way to circumvent the restriction.

Cheung Kong, one of Hong Kong's largest property companies, recently joined hands with several mortgage brokers to offer property buyers loans of up to 90 percent of the price to sell units in one of its new development projects. All 108 apartments, with prices ranging from HK$6.8 million to HK$9 million in that project, were sold out within 90 minutes.

But the mortgage loan market has taken a beating, financial sources said. "The number of mortgage loan applications has dropped more than 30 percent in the past week from a year earlier period," said Sharmaine Lau Yuen-yuen, chief economic analyst at mReferral Mortgage Brokerage Services.

"We believe that the higher first down payment requirement has discouraged many potential buyers from taking the plunge now," Lau said. She predicted that there will be a 40-percent slump in mortgage applications in each of the first two quarters this year.

Hao Jianmin, chairman of China Overseas Land & Investment, said the effect of the latest property cooling measures is limited only to market psychology. There is not going to have much of a "disruptive influence" in the longer term, he said.

Jeffery Ng Chong-yip, senior executive director of Hong Kong Property Services, said he expected the latest measures to have limited effect on prices of small- to medium-sized apartments, which are of the greatest demand. The maximum adjustment in the prices of those properties would not exceed 5 percent, he said.

agnes@chinadailyhk.com

Although the latest cooling measures have hit the city's secondary residential property market, experts believe they exert limited influence on the prices of small- to medium-sized apartments, which are of the greatest demand. Daniel J. Groshong / Bloomberg

(HK Edition 03/10/2015 page9)