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HONG KONG (April 26): Several wary home owners aim to sell their flats and take whatever capital gains are available before chief executive-elect Leung Chun-ying takes office in July.
Young executive Ricky Lai and his sister bought a 647 sq ft flat in Kornhill, Quarry Bay, two years ago. The flat is now worth an estimated HK$5 million (RM1.97 million).
"We can generate a profit of nearly HK$1.5 million if we sold my flat now," Lai said.
"Since I believe Leung Chun-ying will release measures to drag down property prices in order to gain popularity, I'm wondering whether I should sell my flat to secure the profit and then buy a bigger flat after property prices fall."
Lai has set his sights on a larger three-bedroom flat in Kornhill, the likes of which are selling for about HK$6 million at present.
Another resident, William Tam, has already taken action and sold his flat, based on a similar view of what may be in store for property prices.
Tam sold his 1,300 sq ft flat on Kennedy Road in November last year when its value rose to more than HK$18 million — about three times what he paid two decades ago.
"I decided to sell as home prices had surged to a very high level and I reckoned the market has been hitting its peak," said Tam, adding that the decision was based partly on what he expected to happen under a new administration.
"At that time, I believed that Leung Chun-ying would win the election. I also believed he would dare to do something for the general public — something to make home prices more affordable."
Though Leung formally takes office in July, his election has so far failed to put a damper on house prices, which continue to rise. But Tam said he expected this to change.
"As supply increases under his administration, I expect prices will become more stable or soften. That will give me an opportunity to re-enter the market," he said.
Centaline Property Agency founder Shih Wing-ching warned that flat owners quitting the market now may not able to buy bigger flats at cheaper prices later.
"It is very dangerous to sell your self-use flat and then wait for a price correction," he warned, adding that the continuing increases in property prices were due to tight housing supply.
"Leung may increase land supply, but most of that new supply will be used to build public housing and Home Ownership Scheme flats. Only a few sites will be for private housing and this may not increase private housing supply in the short run," he said.
"If Leung wants property prices to fall to a level at which less affluent people can buy, he will have to drag prices down to a very low level. And this will be political suicide as 52% of households in Hong Kong presently own flats."
Since the collapse of property prices during the Asian financial crisis of 1997-98, property owners in Hong Kong had become conservative, Shih said. Also, since the introduction of special stamp duties on quick resales, most buyers were now end-users, rather than investors.
"That's why property prices dropped by only 8%, while stock prices fell 30%, and now I don't think property prices will drop sharply unless another disaster such as the Sars outbreak happens again," he said.
Professor Eddie Hui Chi-man of Polytechnic University's department of building and real estate said he believed Leung would increase land and housing supply, and in particular increase subsidised housing.
"Property prices will soften and drop slightly when the increased land supply turns into increased housing supply and interest rates are raised," Hui said. "I believe interest rates will increase at the end of this year or in 2013 and property prices will stay firm or continue to rise before this happens."
The head of research at Guoco Capital, Eric Yuen Chi-fung, said he believed property prices would remain firm in the short run. — SCMP
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