Published September 4, 2008

HK home transactions slump 60% to two-year low

Home prices in the city down 4.4% between end-June and August

(HONG KONG) The value of Hong Kong home transactions fell 60 per cent to the lowest in more than two years in August, signalling that the city's property market may be poised for its biggest decline since 2003.

Gloomy: With the outlook for the economies of both Hong Kong and China still uncertain, buyers' future property price expectations could continue to fall

The total value of residential transactions last month fell to HK$15 billion (S$2.75 billion) from HK$37.8 billion a year earlier, according to a press release on the Land Registry website. The figure, the lowest since July 2006, represented a 40 per cent decline from the previous month.

Home prices fell in 23 of 25 US metropolitan areas in June from a year earlier as foreclosures pushed down values, real estate research company Radar Logic said. The impact of credit market losses may be spreading to Hong Kong, with the threat of a global economic slowdown and a slump in the stock market leading potential homebuyers to expect to pay less for properties.

'There's a tug-of-war going on between buyers and sellers,' Cusson Leung, a Hong Kong-based analyst at Credit Suisse, said in an interview. 'With the outlook for the economies of both Hong Kong and China still uncertain, buyers' future price expectations could continue to fall.'

The number of Hong Kong home transactions in August fell 54 per cent from a year earlier, and 28.9 per cent from July, to 5,284, according to the Land Registry statement.

Home prices in the city fell 4.4 per cent between the end of June and August, according to figures from Centaline Property Agency. Credit Suisse's Mr Leung, in a July 8 report, forecast a 5 to 10 per cent drop in prices in the second half.

Home values have tracked Hong Kong's economy, peaking in the second quarter of 1997, then crashing in the Asian financial crisis, leaving many homes worth less then their mortgages for years.

The bursting of the 2000 dotcom bubble, the Sept 11, 2001, terrorist attacks and the 2003 severe acute respiratory syndrome epidemic caused prices to fall as much as 70 per cent from the peak. The rebound started in late 2003 and prices doubled in the past four years.

The value of all real estate transactions, including industrial and office buildings and shopping malls, fell 59.2 per cent in August from a year earlier to HK$18 billion, according to the Land Registry. The number of transactions dropped 53 per cent to 6,402, it said. -- Bloomberg