Hong Kong property prices may fall as much as 15 percent by the end of the year, said Walter Kwok, former chairman of Sun Hung Kai Properties Ltd., the world’s biggest developer by market value.
Lukewarm demand at an auction on June 9 for a parcel of land near the Peak district, about a 10-minute drive from the Central business district, will lead to a softening of prices of finished properties, said Kwok in an interview in the western Chinese city of Chongqing on June 18.
“I wouldn’t be surprised they will fall 10 to 15 percent,” Kwok said. “We have already seen the peak.”
Government officials including Chief Executive Donald Tsang have warned of an asset bubble in the Chinese city, where home prices have surged more than 70 percent since the beginning of 2009. In the most recent measures to curb prices, announced on June 10, the government raised up-front payments for properties costing more than HK$6 million ($770,000) and required borrowers whose income is primarily from outside Hong Kong to deposit an extra 10 percent when they buy properties unless they can demonstrate a “close connection” to the city.
The government will add more than 20,000 homes this year and may offer more land for residential projects, Tsang said in an interview in Melbourne on June 17.
Prices may drop 10 percent to 20 percent in 2012 and a further 10 percent in 2013 on rising interest rates, Andrew Lawrence, a Hong Kong-based analyst at Barclays Capital, said in a June 7 Bloomberg Television interview.
Property Shares Fall
The Hang Seng Property Index, which includes Sun Hung Kai, has declined 12 percent this year, while the benchmark Hang Seng Index is down 6.2 percent. Sun Hung Kai fell 16 percent this year and dropped 2 percent to HK$108.90 to close at its lowest since September.
Rising prices should not be entirely blamed on mainland Chinese, and the measures making it more difficult for non-residents to buy property will not solve the problem, Kwok said.
“Hong Kong should not give the impression to the outside world that it practices discrimination; this is open door,” he said.
Mainland Chinese buyers of property in Hong Kong are exacerbating the territory’s shortage of land for development, Tsang said on June 17. Mainland China doesn’t include Hong Kong, Macau or Taiwan.
Buyers from other Chinese cities account for 20 percent to 30 percent of sales, a level Kwok called “reasonable,” especially when compared with London and New York where foreign ownership is larger.
Overseas buyers and those from other Chinese cities accounted for about a third of luxury home transactions in Hong Kong in the first quarter of this year, according to Centaline Property Agency Ltd., the city’s biggest privately held realtor. Savills Plc ranks Hong Kong as the most expensive place to buy an apartment.
Cheung Kong (Holdings) Ltd., controlled by billionaire Li Ka-shing paid about HK$26,763 per square foot, according to Centaline. That is considerably less than the HK$35,000 per square foot the market expected, said Kwok.
Kwok is the eldest son of Sun Hung Kai’s late co-founder Kwok Tak Seng. He was stripped of the company’s chairmanship in 2008 by brothers Thomas and Raymond Kwok, who replaced him with their mother. Walter remains a non-executive director of the company. The family’s combined wealth of $20 billion is second on Forbes Magazine’s list of Hong Kong richest.