Nasty surprise for home buyers in 2013

After rising over 20% in 2012, home prices could jump a further 10% in 2013.

International property consultant Jones Lang LaSalle expects home prices in Hong Kong to increase another 5% to 10% in 2013 fueled by low interest rates and tight supply. Both factors are seen to largely negate the toughest ever government measures to cool the overheated property market.

The firm said the effect of these measures will only play out on prices when interest rates start to rise substantially.

The residential sector's tight supply situation is unlikely to change for another two or three years. Buyer demand will remain strong and continue to lead to rising home prices.

On the other hand, the favorable interest rate environment and tight supply situation led to an increase in the mass market's overall residential prices by 20.3% year-on-year in the first 11 months of the year.

These estimate is line with another leading global real estate service provider Savills, which forecast a 5% to 10% home price gains in the mass property market in Hong Kong in 2013.

The Hong Kong government in late October imposed restrictions on the property market by imposing a 10% to 20% Special Stamp Duty (SSD) on short term home resales within a three-year period. It also imposed an unprecedented 15% Buyers' Stamp Duty (BSD) on home buyers who were not permanent Hong Kong residents.

These steps have successfully reduced the transaction volume in the secondary residential market to a level similar to that after the first SSD was introduced in 2010.

Prices, however, have not fallen and are not expected to fall as home sellers in the secondary market are standing relatively firm on their asking prices.