Hong Kong Home Sales to Slide as Stocks Tank, Centaline Says

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  • Transactions from HK$10 million-HK$20 million fall up to 50%
  • Average selling prices to drop 3% by the end of the year

Home sales in Hong Kong, where prices have surged to a record, are set to extend declines as buying interest slumped with a stock rout, according to one of the city’s two largest property brokers.

Transactions of properties valued from HK$10 million ($1.3 million) to HK$20 million may shrink 20 percent in September from August, Louis Chan, chief executive officer of the residential unit of Centaline Property Agency Ltd., said in a phone interview. Sales of all existing homes done by the closely held real estate agency fell as much as 30 percent in August, Chan said.

Hong Kong’s benchmark Hang Seng Index tumbled 12 percent last month, with the gauge slumping 5.2 percent, or more than 1,000 points on Aug. 24, as concerns about a slowdown in China sent equities worldwide into a tailspin. The index is down another 4 percent so far this month.

“We got quite nervous on the day when the HSI dropped 1,000 points, because our daily revenue vanished 50 to 60 percent in a single day,” Chan said. “Nobody was in the mood to buy an apartment.”

Average selling prices of existing units may drop 3 percent by the end of 2015 from current levels, he said.

Hong Kong monthly home sales were the weakest in 17 months in August, the government said Wednesday. The city sold 3,896 residential units last month, about one-third fewer than a year earlier.

Selling Prices

“Hong Kong’s housing market had a relatively high correlation with the equity market in the past, so the recent slump in stocks may weigh on property buyers sentiment in the short term," Alan Jin, an analyst at Mizuho Securities Asia Ltd, said by phone. “In a longer term, I believe the city’s property market will remain largely stable for the rest of the year unless we see some major macro headwind, such as a deterioration in employment. "

Developers including Henderson Land Development Co. have been offering second mortgage loans and raising commission to agents to sell homes, the South China Morning Post reported Aug. 31.

The volume of contracted sales at Centaline for existing apartments valued from HK$10 million to HK$20 million tumbled 50 percent last month, Chan said. The broker’s commissions, which are seen as an indicator of the city’s housing market, dropped about 37 percent in August from the previous month, he said.

Chan said that he expects selling prices for new properties to be set about 10 percent lower in September than in late July and early August.