With the fear of an ongoing worldwide recession, slow expansion in local economies as well as the continual effect of tightening policies, Knight Frank and Holdways remain cautious towards the outlook for both Mainland China and Hong Kong's residential markets. Residential prices in both Mainland China and Hong Kong are expected to experience mild movements in 2013.
On 27 October, the Hong Kong Government introduced a new Buyer’s Stamp Duty (BSD) as well as extended and intensified the existing Special Stamp Duty (SSD). Under the new policy, local and foreign companies as well as non-permanent Hong Kong residents have to pay an additional 15% BSD when buying homes in Hong Kong. Meanwhile, SSD has been extended for three years and rates have been raised—from 15% to 20% for a resale within six months of purchase, from 10% to 15% for a resale within 6–12 months and from 5% to 10% for a resale within 12–36 months.
"The policies have dragged down transaction volumes but not prices," says Mr Thomas Lam Ho Man, Head of Research at Knight Frank in Greater China. "Demand from speculators and investors is expected to be checked by the increased policy risks and investment costs. This will be particularly apparent for primary residential projects, where a significant proportion of buyers are companies or Mainlanders. The number of residential transactions totaled 71,012 in the first ten months of 2012, but is expected to drop over 10% to only 75,000 in 2012, compared with 84,442 transactions over 2011."
"However, with low interest rates and strong financial conditions, landlords and developers are not expected to offer significant price cuts. Residential prices are set to remain stable in 2013, with mild upward or downward movements of less than 5%. Speculators, having been deterred by the new policies, have shifted their focus towards non-residential sectors such as commercial, industrial and even car-parking space. A significant increase in car-parking space transactions was witnessed after the enforcement of the policy."
"Secondary homeowners are likely to hold on to their properties or release them onto the leasing market, given the low interest-rate environment and new stamp duty policies. Potential buyers who cannot afford the high prices, or are waiting for a price drop, are expected to shift towards the leasing market. Therefore, the leasing sector is expected to remain strong with sustained supply and stable demand. Having risen 15% in 2012, residential rents are expected to gain another 10-15% next year."
On the Mainland, now with all eyes on the March 2013 handover of power, property analysts are waiting to see whether the new leadership continues with the current property cooling measures, given the slowdown. Miss Helen Liu, General Manager at Beijing Holdways Information and Technology, expects the Central government to continue with its determination to curb the residential property market. A property tax, which has been introduced in Shanghai and Chongqing, would be expanded to other cities on the Mainland.
"However, residential transaction volumes have started to rebound since the second half of 2012, due to strong end-user demand. They are expected to rise 30% year on year in 2012 and grow another 15% year on year in 2013. Home prices have also started to experience mild rebound. We expect home prices in first-tier cities, such as Beijing and Shanghai, to further growth by less than 5% in 2013, while those in second and third-tier cities could be under downward pressure," says Miss Liu.