HONG KONG: Back-to-back holiday weekends and policy changes may have taken a toll on home sales. New data recording a plunge in home sales suggest that Hong Kong's hot housing market has had two very chilly weekends - on the Chung Yeung and Halloween weekends, and after government steps to squelch a potential property bubble.

Transactions at the top 10 residential projects in the territory fell to a total of 21 during October 31 to November 01, down 58 percent from the previous weekend, which also revealed weakening home sales, data compiled by property agency Midland Realty Limited show.

Meanwhile, data from another major real estate brokerage house, Centaline Property Agency Limited, indicate that transactions at 10 of the city's biggest residential projects slid to 37 during the same period, down 30 percent from the previous weekend.

Analysts blame policy uncertainties for the slowdown in the property market.

However, changes in home-buyer behavior on holiday weekends must also be factored into the declining home-sale data, e.g., shopping for children's Halloween costumes instead of homes, or simply traveling or visiting relatives on the long Chung Yeung festival weekend, instead of home-hunting.

Nonetheless, some analysts suggest there are more systemic forces at work: "The transaction volume will likely (continue to) slow down as some prospective home buyers have adopted a wait-and-see attitude, fearing further government measures," said Patrick Chow, research head at Ricacorp Properties.

The government raised the downpayment requirement for luxury homes costing HK$20 million or more from 30 percent to 40 percent on October 23, and warned last week that it may intervene if the property market becomes "unhealthy" and "unfair".

The moves came after hot money, low interest rates and relatively-low housing supply sent local home prices soaring, with luxury market prices surging over 40 percent from the end of last year and topping peak levels during the last bubble period in 1997, with prices in the mass market also jumping, nearly 30 percent.

The price surge - against the backdrop of a slow economic recovery and a high unemployment rate of 5.3 percent - has raised fears about a property bubble.

Buggle Lau, Chief Analyst at Midland Realty, also noted a wait-and-see attitude among potential home buyers.

"Government policies have significant implications for the property market. With the uncertainty surrounding government polices, transaction volume will be affected more or less," he said.

Wong Leung Sing, Associate Director (Research Department) of Centaline Property Agency Limited, believes the housing market has peaked for the short term.

All three analysts expect the transaction volume for the whole of October to decline, with Wong and Lau seeing a drop of at least 10 percent and Chau predicting a 20-30 percent fall.

The transaction volume for October will be known only by the end of November, as there is usually a four-week time lag between closing a transaction and the lodging for registration with the Land Registry.

The analysts also expect home prices to slip in the short term, with Wong forecasting a 2-3 percent drop from the current levels and Chau seeing a 3-5 percent fall.

However, Lau believes home prices "will stay stable, unless the government takes further actions against the property market".

(HK Edition 11/03/2009 page4)