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Residential prices on the Peak sink to decade low
HONG KONG: Home prices on the Peak, Hong Kong's most-expensive residential area, had their steepest decline since the Asian financial crisis a decade ago, real estate agency CB Richard Ellis Group said. Prices slumped 30.5 percent in the fourth quaHONG KONG: Home prices on the Peak, Hong Kong's most-expensive residential area, had their steepest decline since the Asian financial crisis a decade ago, real estate agency CB Richard Ellis Group said.
Prices slumped 30.5 percent in the fourth quarter of 2008 from a year earlier as the recession damaged demand. It was the biggest drop since the 45 percent loss in the third quarter of 1998, according to Margaret Ng, senior director of Greater China at CB Richard Ellis.
The deteriorating economic outlook and mounting job cuts in Hong Kong have curbed demand for real estate and led potential buyers to wait for prices to drop. Hong Kong's Hang Seng Index and the mainland market have both dropped nearly 60 percent since their October 2007 peaks, cutting into homebuyers' savings.
"In early 2008, prices went really crazy because of stock market gains," Ng said. "Many Chinese also had money from IPOs in Hong Kong, and when they get rich, the first place they look to buy is the Peak."
The number of luxury homes - those worth at least HK$10 million - changing hands fell 65 percent to 258 in January from 734 a year earlier, Land Registry figures show.
Prices fell to an average of HK$16,678 a square foot in the fourth quarter on the Peak, erasing almost all gains posted since mid-2007, Ng said. In the second quarter, prices surged to an average of HK$30,413 a square foot, she said.
A house in Sun Hung Kai Properties' Severn 8 project sold for a record HK$55,000 a square foot in the first half of last year.
Overall, luxury-home prices in Hong Kong, including the Peak, Jardine's Lookout, Island South and Mid-Levels, fell 19.2 percent in the fourth quarter from a year earlier, CB Richard Ellis said. Hong Kong has the second-most expensive luxury-home prices in Asia, at an average of $16,125 per square meter, after Tokyo, according to the Global Property Guide website.
Even with the recent decline, luxury prices are unlikely to fall to the lows posted during the SARS epidemic in 2003, because buyers are richer and managing risks better, Ng said. Prices on the Peak averaged HK$6,346 a square foot in the third quarter of 2003, she said.
"The delinquency ratio on mortgages is falling, and yet home loans are rising: This shows it's not an unhealthy market," Ng said. "We don't see people dumping their property at really cheap prices, and Hong Kong people have gotten rich enough to prefer to hold on for a price recovery instead of selling."
Fourth-quarter prices were also 63.4 percent higher than the average HK$10,206 a square foot fetched at the Peak in the third quarter of 1998, she said.
Still, Ng said, the unknown length of the financial crisis and the possibility of more job cuts weigh on luxury property prices.
"We need to look at one to two more quarters of unemployment figures," she said, adding that homeowners may be forced to sell at low prices out of desperation.
Rents on the Peak fell only 3 percent in the fourth quarter from a year earlier because tenants there are usually senior managers of major foreign companies, Ng said. Luxury rents dropped the most in the Mid-Levels district, by 10.8 percent, as most expatriate tenants there are at more junior levels, and some were laid off or had housing allowances cut, she said.
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