LI, Tao @ Hong Kong

Residents advised to be cautious when planning to buy apartments

The city’s home supply in the next 3 to 4 years will be increased by as much as 60,000 units, which will likely be enough to meet demand, Financial Secretary John Tsang said Monday, emphasizing the government’s determination to maintain a healthy real estate market.

Tsang also advised residents to be cautious in making their home buying decision, as the recent volatility in equity markets is likely to affect the city’s property prices in the near future.

“When making investment plans on buying homes, I advise citizens to be aware of the potential risk, and making decisions according to their ability,” said Tsang, who fielded questions from lawmakers Monday. “Home prices have increased substantially over the past year, which I think is extremely unusual,” he added.

The number of property transactions was down 10 percent in May compared with one month earlier as the effect of recent government measures aimed at curbing speculative activities in the real estate market plays out gradually, according to the Financial Secretary.

Tsang said the government has been concerned about a potential bubble in the property market due to low interest rates and ample liquidity.

According to the Centa-City Index, a popular home price index complied by property agency Centaline Property Agency Ltd and the City University of Hong Kong, the city’s home prices rose to a 12-year high in April, despite an increase in the supply of local flats in the first quarter.

“Hong Kong’s property prices no longer reflect the real supply and demand (situation),” said Wong Leung-sing, associate director of research at Centaline. “Huge sums of cash will continue to flow into the property market amid a low-interest-rate environment and in anticipation of future inflation, though I believe the real demand is comparatively low.”

Wong said the overheated real estate market has outrun the city’s economic recovery, which has led to corrections in property prices recently. He expects the transaction volume to continue to drop in the next two months until the third quarter, when Hong Kong’s economic outlook becomes clearer.

Hong Kong’s home prices increased as much as 29 percent in 2009, and gained another 8.4 percent in the first quarter this year. Adressing concerns about soaring property prices, the Hong Kong government has come up with a series of measures to curb possible price manipulations by developers and announced increased stamp duties on some property transactions, as well as acceleration of government land auctions.

But auctions on the Tung Chung site and Fanling site in May received lukewarm response from the developers. Both were sold at low prices and failed to live up to surveyor’s expectations.

China Daily

(HK Edition 06/08/2010 page3)

http://www.chinadaily.com.cn/hkedition/2010-06/08/content_9945934.htm