Hong Kong Developer `Price War' May Speed Property Correction

  • CLSA says prices to fall 3% per month in first quarter
  • Declines may prompt policy response to ease stamp duties

Hong Kong property prices could fall 3 percent per month during the first quarter, driven by a “price war” between developers as they offer discounts to move a rising supply of homes, CLSA Ltd. said in a report.

CLSA expects a correction of 8 percent in the first quarter, accelerating from a previous estimate of a 2 percent decline. CLSA said the price declines will mostly come in the first part of the year and left unchanged its forecast of a 10 percent decline for all of 2016. The home price drops may prompt a response from Hong Kong policymakers, according to the report.

Analysts are turning increasingly bearish on the property market in Hong Kong, which is set to overtake Singapore as the weakest-performing luxury home market this year, according to Knight Frank LLP. Until now, developers have resisted making outright price cuts, offering hidden discounts to homebuyers such as rebates on stamp duties and inducements such as mortgage financing.

"With the price downtrend so obvious, there is no longer incentive to hide price cuts," according to the CLSA report, led by property analyst Nicole Wong.

The report also told investors to watch out for a possible policy response by the Hong Kong government in the face of price declines of 18 percent between the fourth quarter of 2015 and June 2016, by amending the stamp duty which had been doubled in 2013 to curb prices.

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