A local property agency predicts that the number of sale and purchase agreements received for registration in the Land Registry for November will drop to a 69-month low of around 5,000. The figure will almost reach the bottom level of 4,622 seen in January 2003. Edmond Tang

Local property agencies expect Hong Kong's property market in October will face a similar situation as was witnessed during the SARS outbreak in 2003 due to the financial turmoil.

Ricacorp Properties, a local property agency, released a research report yesterday, predicting that the number of sale and purchase agreements received for registration in the Land Registry for November, which reflects the local property market in October, will drop to a 69-month low of around 5,000.

The figure will almost reach the bottom level of 4,622 as was seen in Jan 2003 during the SARS epidemic.

Patrick Chow, head of research at Ricacorp Properties, said the collapse of Lehman Brothers in September has shattered the market confidence, which also had an adverse impact on the turnover in the local property market.

"The turnover has encountered a further slowdown in October, as local banks tightened up the mortgage rate," said Chow.

According to the Land Registry, the total number of sale and purchase agreements for October, reflecting the situation of September, slid 20 percent to 5,898. The turnover has also dropped 18 percent to HK$19.3 billion, the second time this year to fall below HK$20 billion.

Sale and purchase of first-hand properties in October plummeted 57 percent to 391 units, as the property developer has reduced the amount of units for sale amid the gloomy market situation, Ricacorp Properties said.

The second-hand property transactions also faced challenges in October, with the sale and purchase agreements shedding 16 percent to 4,340 units and the turnover declining 22 percent to HK$15.2 billion, following the surge in mortgage rate.

Chow said it is difficult to know whether the property market has hit the bottom, as it depends on the external economic environment and development of the local stock market.

Centaline Property Agency Associate Director for Research Wong Leung-sing said the property market may show a slight rebound toward the end of this year, after a sudden drop in November.

"The sale and purchase agreements (to be reflected in December's figures) may amount to 7,000, while the property selling prices may drop by 20 percent from its peak in three to four months ago," said Wong, who also estimates the turnover in November figures will reach around 5,000.

With Hong Kong facing a possible recession next year, UBS also forecasts the residential property price may drop by 30 percent in mid-2009.

The bank has downgraded Cheung Kong and Hang Lung Properties to "neutral" from "buy" and reduced their target price from HK$139.7 to HK$76.2 and from HK$30.44 to HK$18 respectively.

(HK Edition 11/04/2008 page2)