New round of property measures fails to dampen market sentiment

Residential sale and purchase agreements up 36% YoY.

In an attempt to stabilise home price movements, the government introduced 10 measures aimed at providing adequate housing supply in the market over the short and medium term. However, as the short term measures only consist of about 1,830 subsidised units spread over the next two years and the longer term land supply will take time to complete, the announcement of these measures had little impact on sentiment in the luxury segment of the market, said Jones Lang LaSalle.

Here's more from Jones Lang LaSalle:

In addition to the government’s new housing supply measures, the government also further lowered loan-to-value ratios on new loans for applicants with one or more properties under mortgage for investment purposes, net-worth based applicants and those whose principal income is derived from outside Hong Kong. In the current end-user driven market, however, the impact on purchasing demand was limited.

Market sentiment was largely positive in 3Q12 despite the number of residential sale and purchase agreements (ASPs) declining by 6.0% q-o-q to 21,097. The number of residential ASPs recorded was, however, up by 36.0% y-o-y. Demand for luxury properties remained soft with preliminary data showing just 75 properties priced over HKD 50 million being transacted, down by 50.7% q-o-q but still up 25.0% y-o-y.

New projects launched in the primary sales market during the quarter were received positively by buyers. Henderson Land and New World Development, for example, sold 47% of the 928 units at Double Cove in Ma On Shan while Sun Hung Kai Properties and MTRC sold over 30% of the 1,075 units at Century Gateway in Tuen Mun.

In the leasing market, demand for top-end luxury residential properties remained weak on the back of falling expatriate inflows.

Supply

Three luxury projects (providing a combined 54 units) were scheduled to be completed in 3Q12.

Asset Performance
The announcement by the US Federal Reserve to keep interest rates at low levels until at least 2015 saw more cash-rich buyers enter the market. As a result, luxury residential capital values edged up by 1.7% q-o-q in 3Q12. Luxury rents, however, retreated further, by 1.9% q-o-q over the same period, as demand remained weak.

12-Month Outlook
Under the current restrictive measures, transaction volumes are expected to stay at low levels since owners will be less likely to sell because of the potential inability to re-enter the market due to the higher entry costs. Low interest rates coupled with a healthy labour market and a tight supply pipeline, however, should continue to lend support to prices over the near term. We project luxury residential capital values to grow by 5–10% in 2012 and within a single-digit range in 2013. Weak demand is expected to continue to drag luxury residential rents lower through the remainder of 2012 though an improved economy from 2013 onwards will help bolster leasing demand and support rental growth.