Chinese buying in primary real estate product has gone up from a low of 8.4% to a high of 14% because of developers offering rebates on Buyer Stamp Duty. The Mortgage terms for buyers of primary property segment are better than that of secondary product. In case of primary the buyers are able to secure 100% of the price paid for the property. However in secondary the banks apply a discount whereas the developers may provide a rebate which from a buyer’s perceptive increases the LTV in comparison to the LTV in the secondary.
Qi-homes is anticipating a fall of 10-15% in HK residential prices even though they do not think that the prices are going to fall in a short term because of resilience of developer’s balance sheets. Developers are speeding up new launches and projects but don’t really have to panic sale. Moreover, as part of the government policy the speculators were dispelled from the market around two years ago. As long as interest rates are so low, property owners and long-term investors have no incentive to sell their properties which keeps the market stock low.
Because of Hong Kong government’s intervention, the transaction activity in this field is at its lowest in last 23 years affecting speculators (SSD special stamp duty), Foreigners (BSD buyers stamp duty) and upgraders (DSD Double Stamp Duty). However the first-time buyers, who are traditionally only 11% of the HK real estate market, have largely remained unaffected by the slump in the industry. It is the high-end buyer which is most affected. The marginal fall in prices has caused a mild increase in secondary transactions albeit, without any increase in the secondary listings. Qi-homes estimate that the pick-up will be very short-lived.
Statement of Risk
Major risks prevalent in the global real estate scenario are as follows:
1) An increase in interest rates beyond expectations can lead to negative returns for real estate developers because of negative impact on real estate valuations.
2) Low yields in real estate can result in asset allocation into higher growth sectors like equities, provided the return on equities is around a double digit figure.
3) Extended periods of economic slumps can result in tenant bankruptcies.
4) Overbuilding during economic slowdown results in oversupply and increases vacancies.
Qi-Homes, a very well known name in the real estate market in Hong Kong offering comprehensive range of personalized property services to meet the buying, selling, renovation, consultation, relocation, and rental needs of individuals.
For More information or to Learn All about Qi-Homes, please go to http://www.qi-
712 Yip Fung Building, 2 D’Aguilar Street, Hong Kong
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