Hong Kong, 9 March 2016  -   Hong Kong’s housing market has been going cold since September 2015 with prices falling on a slow but steady basis. Fueled further by fears of a deeper downturn in the property market, housing sales volume looks set to remain at snail pace.

“In January, mass and luxury residential prices have dropped by 8.9% and 4.6% respectively, as compared to the peak in September last year,” Antonio Wu, deputy managing director of Colliers International said. “As the Hong Kong housing market sentiment is weak, transaction volumes stagnated at a record low level. For the whole month of February, there were only 1,807 deals recorded in the residential market with a total value of HKD11,769 million.”

Although the new homes supply has increased, Colliers does not see any prospect of a housing market crash as the number of private homes completion rate is only at 11,280 units, still below the absorption rate of 16,826 units. In addition, there are no obvious indicative signs of construction cost going down.

Wu also sees growing interest from Mainland developers, particularly in core central locations. “Mainland developers are still quite confident in Hong Kong’s residential market over the medium to long term. This is partly due to the instability of the Chinese Yuan versus the relatively stable Hong Kong economy.”

Vincent Cheung, executive director for Asia valuation and advisory services concurs with Wu’s comments. “The government has no intention to relax any cooling measures as the possibility of a major home prices correction is unlikely. That said, we see the government’s response to the property correction by lowering their land sale prices and effectively reducing the risk of withdrawals from tenders, which is directly linked to the future home supplies.”

Looking ahead, Colliers projects the average mass and luxury residential price will experience a soft landing with a decline of 10% and 15% respectively for the whole year of 2016.