- As the rapidly-spreading coronavirus further dampens market sentiment, developers will have even less incentive to finish units, say experts
- Completion of new flats fell 35 per cent last year as months of civil unrest and the effects of the trade war dampened demand for homes
Updated by SCMP: 4 Feb 2020
Property transactions in Hong Kong fell to a 13-month low as analysts warned the coronavirus outbreak is likely to further derail the world’s most expensive housing market.
The value of all properties changing hands in January dropped 17 per cent to HK$29 billion, while the number of transactions slipped to 3,776 from 3,908 a month earlier, the Land Registry revealed on Tuesday.
Meanwhile, data from the Transport and Housing Bureau showed a total of 13,600 new flats were built last year, the lowest number since 2015.
That was a drop of 35 per cent from the previous year, as developers held back in a housing market rocked by months of social unrest, the effects of the US-China trade war, and an impending vacancy tax that would penalise them for harbouring unoccupied, finished apartments.
Now the viral outbreak that started in Wuhan, China, and has infected at least 15 people in Hong Kong looks set to further dampen sentiment in the world’s most expensive property market.
It was “a proactive measure to better protect the health of our staff and their families,” New World said in a statement. It added: “We will review the development of the epidemic on a weekly basis and may adjust the reopening day of our construction sites if required.”
Some contractors have had to stop work as they failed to get a government permit while civil servants worked from home last week, according to Vincent Cheung, managing director of Vincorn Consulting and Appraisal.
On January 28, the government ordered civil servants to stay away from the office for a week as part of efforts to minimise the spread of the disease. Government offices began to resume work this week.
In the week ended February 2, sales of used homes dropped to a 23-week low of just 51 deals across 50 housing estates tracked by Ricacorp Properties.
“Prospective buyers are reluctant to go out to view flats as the government advises people to avoid public gatherings during the outbreak of the coronavirus,” said David Chan, a director at Ricacorp.
The health emergency is also likely to disrupt shipments of vital construction materials, said Cliff Tse, a senior director at JLL.
“The latest coronavirus will somewhat slow the construction activities in the first quarter since imports of some materials and appliances, in particular from China, will not be as smooth as expected,” said Tse. “However, local construction activities are expected to pick up in the second quarter and thereafter.”
Vincorn’s Cheung said last year’s fall in construction of new homes was down to a combination of the impending vacancy tax, protracted anti-government protests and the US-China trade dispute.
“As developers acknowledged these negative factors would dampen buying demand, there were no incentives for them to build fast. On the other hand, developers would be liable to pay vacancy tax if their completed units remain empty for six months,” he said.
The government proposes levying a tax of 5 per cent of a flat’s value if it is left empty for six months or more after it receives an occupation permit, to stop developers from hoarding completed but unsold properties, and to ease the city’s housing shortage.
Cheung does not believe the low completion rates will push up prices.
“The upward pressure on home prices would be offset by the depressed market sentiment,” he said.
The official price index for used homes dipped 1.7 per cent to 378.5 in December, according to the Rating and Valuation Department.
Panic-selling has seen some flats change hands at large discounts as homeowners fear prices could fall further in the coming months.
In Tung Chung, a 736 square-foot unit at Caribbean Coast was sold for HK$7.18 million, after the vendor slashed the price twice from the original asking price of HK$9.5 million last April.
“The owner reduced the price again last week in view of the coronavirus becoming more serious. The flat finally sold without the buyer even viewing the unit,” said an agent at Midland Realty.