In The Doldrums

April 18, 2008

The lull of the luxury property sales market continued into April, as transactions on all fronts shrank further. Buyers are all holding back and adopt a wait-and-see attitude. The ending of US subprime mortgage woes and credit crunch in major financial markets is not in sight, and the fallout has serious impact on property markets worldwide. Corrections are seen in the US and many countries in Europe, and also in Hong Kong and Japan. China's property market cannot escape the same fate although for a different reason.

Sales transactions in Southside and The Peak on Hong Kong Island plummeted as much as 60% compared with February. Property owners' asking prices have softened and some desperate sellers are widening the margin for negotiation. However, the prices are still not low enough to lure buyers back into the market. Some on-going deals were put on hold as buyers were having a second thought. The price gap between seller and buyer is widening and sales are stalled.

Amid mixed good and bad news that emerge every day, the market seems to have lost its sense of direction. This uncertainty has prolonged the market lull. The finance industry is feeling the pinch as lay-offs are setting in. Property sellers from this sector are on the increase. When financial corporations are steering towards austerity, the high end property market is bracing for a cool off, as both sales and leasing markets have been underpinned by strong demand from the sector in the past. Counter-balancing this is the fact that low supply of new flats since last year will likely continue for a couple of years and the remaining stock available for sale has been decreasing. Low interest rate and climbing inflation will also help shore up market confidence. What will evolve from all this in the next few months will decide the direction of the market. But before that. the market will remain in the doldrums.

By Annette Young