Hong Kong Home Sales Seen Capped as Investors Shut Out

Hong Kong’s home sales, which hit a two-year high in July, lack the catalyst to rebound further as government policies to contain prices deter speculators, according to the city’s two-biggest property brokers.

Monthly sales volume may be capped at around 7,000 to 8,000 in the third quarter as existing homeowners are reluctant to sell and investors are discouraged by additional taxes, according to Centaline Property Agency Ltd., Hong Kong’s biggest closely held realtor. The number of new and existing homes changing hands in July reached 7,792, the most since October 2012, data released by the Land Registry yesterday shows. Transactions were as high as 11,358 in March 2012, the most monthly volume since 2011.

Housing sales are rising again after transactions plunged last year to the lowest since at least 2002 as the government stepped up cooling measures to quell prices that have doubled since 2009. While buyers are returning to the market, the pool is still limited as levies including a 15 percent tax on foreign purchasers remain.

“It’s an end-user-to-end-user market,” said Wong Leung-sing, an associate research director at Centaline in Hong Kong. “You won’t get that explosive momentum without speculators. There are too many regulations and too little supply.”

Transactions are being driven by new projects as developers have been offering discounts and subsidies to attract buyers. Total home sales reached HK$57.1 billion ($7.4 billion) in July, more than double the value a year earlier and the highest since March 2012, according to Land Registry data. The data didn’t break down new and existing homes.

New Projects

The July data reflects sales at new projects including City Point, the 1,717-unit residence developed by Cheung Kong Holdings Ltd. and Nan Fung Development Ltd., and The Grand Austin, built by Wheelock & Co., New World Development Co. and MTR Corp., Centaline and realtor Midland Holdings Ltd. said. August transactions will be underpinned by sales at Mont Vert, another Cheung Kong apartment project, Centaline’s Wong said.

Transactions of existing homes in July may have been around 5,500 units, below an average of 7,000 to 8,000 units a month, according to Midland, the biggest listed real estate agency in the city. Existing homes make up the majority of the market, accounting for about 80 percent of the sales volume.

“The market undoubtedly has picked up despite the policies staying unchanged,” Buggle Lau, Midland’s chief analyst, said by phone yesterday. “But you can see that the existing home market has slowed again recently as homeowners are raising their asking prices.”

Only 10 existing homes changed hands in the top 10 housing estates in the city over the weekend, compared with 256 new homes sold, Jefferies Group LLC analysts led by Venant Chiang said in a note today.

Existing home prices, tracked by Centaline, have gained 4.4 percent since the start of June after falling as much as 5 percent from a peak in March last year. Analysts from Citigroup Inc. to JPMorgan Chase & Co. are revising up their forecasts. Prices may fall 5 percent this year instead of an earlier forecast of a 10 percent drop, as the U.S. delays interest rate increases, Bank of America Corp. analyst Raymond Ngai said last month.

Hong Kong’s interest rates track those in the U.S. because the Hong Kong dollar is pegged to its U.S. counterpart.

(An earlier version of this story was corrected to say July sales were most since October 2012.)

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