HONG KONG : Potential home buyers and sellers in Hong Kong are still digesting news of the government's latest property cooling measures.
While the surprise announcement last Friday sent property counters sharply into the red on Monday, some market watchers said the new duties are likely to only have a short-term effect, and will do little to help first-time home buyers.
Potential home buyers in Hong Kong may be looking, but many are holding back from making that purchase.
According to agency Centaline Property, the number of second-hand buyers fell 40 per cent over the weekend, as the latest cooling measures kick in.
Meanwhile, Ricacorp Properties said initial reports show that transactions of new flats dropped to nearly zero.
Nicholas Brooke, chairman of Professional Property Services, said: "Effectively, the market stalled. As we have seen over the weekend, essentially no one - until they can get a better feel, a better understanding of what the government's intentions are - is in transaction mode. So buyers are holding back, sellers are also holding back."
Hong Kong's red hot market has made buying a home unaffordable for many residents. On Friday, Hong Kong's Financial Secretary John Tsang said that average prices for small- and medium-sized flats have risen by around 21 per cent in the first nine months of this year.
To rein in prices, he announced a new 15 per cent property tax on non-local residents and companies, and a hike in stamp duty for properties sold within three years of purchase.
It is estimated that around 20 per cent of new home purchases last year were made by non-permanent residents.
Some property watchers said the new measures may put off foreign buyers, resulting in a 15 to 20 per cent drop in luxury prices next year.
But this is not expected to help first-time home buyers in Hong Kong, who typically would not be looking at such high-end properties.
Other analysts said that overall residential property prices could fall by 10 per cent over the next six months.
However, they believe the new measures will only have a short-term effect and prices could rebound again.
Francis Lun, managing director of Lyncean Holdings, said: "There is no magic potion, because the government still failed to increase the supply of land. So you do not have an oversupply of property.
"In the property market, for property prices to fall, you have to have an excess of supply over demand. And this is what the government has failed to do."
Some analysts also believe investors may turn to commercial and industrial property as a safe haven, which could result in hiking up prices and rents for businesses.
In trade on Monday, property counters took a hit, with shares of Hong Kong's top two developers Sun Hung Kai and Cheung Kong Holdings down by about 5 per cent each.
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