Beijing’s curbs reduce appetite for Hong Kong flats

HONG KONG: China’s investor sentiment has taken a hammering from recent measures to clamp down on credit and curb property price growth in the country, analysts say -- and the spillover effects are already evident in Hong Kong's property market.

"The number of flat viewings booked by mainland investors has fallen by as much as 50% since the middle of last month," said Thomas Lee Pui-cheung, a regional sales director for Centaline Property Agency in Kowloon Station and Tsim Sha Tsui.

Increasingly strict measures imposed on the mainland to rein in prices by tightening lending to curb property speculation had dented mainland investor appetite for overseas properties, and Hong Kong in particular, agents said.

Upmarket properties favoured by mainland buyers, such as the Cullinan, the Arch, and the HarbourSide, in West Kowloon; and Bel-Air Residence in Pokfulam, had been particularly badly hit by the withdrawal of mainland buyers, they said.

The developments are popular because they are new and provide the most luxurious clubhouse and interior fittings.

One mainland investor recently sold an 886 sq ft flat at the Cullinan in Kowloon Station for HK$14.5 million (RM6.04 million), HK$350,000 less than the HK$14.85 million he paid for the unit last November.

Agents said it would be the first transaction done at a loss for the development in the secondary market since it was put on sale by the developer, Sun Hung Kai Properties, early last year.

"The withdrawal of mainland capital will have a significant impact on West Kowloon as four in every 10 property transactions were sold to mainlanders," Lee said.

Until recently mainland investors had played a big role in driving up Hong Kong's luxury residential prices because they were quick to do deals at generous prices, he said.

But in the absence of such big clientele, transaction volumes have already dropped by some 30%, while the average price at which the reduced number of deals were being done at the Cullinan has fallen by 1.6% to HK$17,900 per sq ft from last month's HK$18,200 per sq ft.

Danny Lam, the senior sales manager for Hong Kong Island at Hong Kong Property Services (Agency), expects to see a sharper price correction if mainland buyers remain out of the market.

"Luxury home prices will definitely come under downward adjustment pressure as local investors are unlikely to make aggressive bids," he said. Lam believed that owners would have to lower their asking prices by between 5% and 8% if they were serious about finding buyers.

Patrick Chow Moon-kit, the head of research at Ricacorp Properties, said some investors had changed their strategy and were now leasing flats after seeing sales volumes declining.

"It is difficult to find a mainland investor willing to buy a luxury unit these days," he said.

In one such leasing deal, a 1,032 sq ft unit at the HarbourSide was leased for a monthly rental of HK$27,000 or HK$26 per sq ft, compared with previous rentals in the range of HK$32 to HK$37 per sq ft.

Earlier this month, the People's Bank of China ordered banks to increase deposits held in reserve, to restrict lending.