Hong Kong's property correction is getting further, with house prices falling even more, influenced by China's economic turmoil and rising housing supply.
Centaline Property Centa-City Leading Index said that January was the lowest monthly level for sales of new and secondary homes since 1991, Bloomberg reported. House prices dropped nearly 11 percent from the peak level in September.
One of the casualties of the property price collapse is a piece of land the government recently sold for 70 percent less than a similar transaction back in September. The deal that was closed on Feb. 12 involved the sale of Tai Po land, which measures 405,756 square foot, for HK$2.13 billion ($274 million) to Asia Metro Investment Ltd.
Another factor contributing to the downward movement of property values is the government's increase in its five-year target of 97,100 new housing supplies from 77,000 homes. This increase in supplies, rising interest rates and slow economic growth in Hong Kong make the property sector even more difficult. Home prices are also expected to be cheaper given the land purchases are lower.
Based on Standard & Poor's new research, Hong Kong's property prices are projected to further decline from 10-15 percent this year, as per China Money Network.
"Our ratings on most Hong Kong property developers in general can withstand a 30 percent drop in sales before reaching the downgrade trigger," Standard & Poor's credit analyst Esther Liu said.
S&P's current outlook for Hong Kong developers is stable, but it will become a downgrade when the prices dropped to a significant 50 percent.
Things could get worse should there be a more sluggish domestic economy, an aggressive price war among developers and a worse-than-expected China's economic conditions, China Money Network reported.
Property price collapse in Hong Kong was a bit of unexpected when the city ranked as the most expensive housing market among 87 major regions based on the annual Demographia International Housing Affordability Survey, as Bloomberg noted.
