[Retapleapse]

HK home values tumble as economy slumps

Bloomberg News | 2011-8-16 |

Aug 16, 2011

Derek Ma and his family in May sold two of their eight properties in Hong Kong,
doubling their money in four years. They're struggling to sell the other six.

"We have been trying to offload more, but many sellers are now cutting prices,"
said Ma, 36, whose portfolio includes units mainly in the upscale Mid-levels and
Island South districts. "There's definitely a softening in prices."

Hong Kong home values, which surged 70 percent in the past two-and-a-half years
and outperformed stocks, are set for their biggest decline since Lehman Brothers
Holdings Inc collapsed in September 2008 as land supply increases and global
growth slows. Midland Holdings Ltd and Centaline Property Agency Ltd, the Chinese
city's two biggest real estate agents, said home prices are being reduced by as
much as 10 percent.

"We should see at least a 5 percent further correction in the second half if the
crisis in the United States and Europe deepens," said Sylvia Wong, a
Hong Kong-based analyst at UOB Kay Hian Ltd. "If there's enough panic in the
market, we expect to see more price cuts."

Hong Kong's benchmark Hang Seng Index has dropped more than 20 percent
from a November high after Standard & Poor's downgraded the US's sovereign-debt
rating for the first time on August 5. The Hang Seng Property Index, a measure of
Hong Kong's seven-biggest developers, is down 24 percent in the same period.
The index rose 2.1 percent at the local time close of trading.

Home transactions fell to a 30-month low in July, while a land auction last week
missed forecasts. The HK$5.5 billion (US$704 million) paid by a group including
Sino Land Co and Kerry Properties Ltd was the only bid and 33 percent below
the median HK$8.25 billion.

"The government land sale policy has changed," said Andrew Lawrence, a
Hong Kong-based analyst at Barclays Capital Plc who is predicting prices to
fall as much as 30 percent by 2013. The auction result "implies a policy shift
from maximizing tax revenue to a commitment to increasing housing supply."

The site auctioned was the 15th put on the market by the government, which
has pledged this fiscal year that began April 1 to provide more land for units
to counter rising home values. It sold 17 sites the previous financial year.

Home transactions fell for a seventh straight month in July to the lowest since
February 2009, according to Land Registry figures.

Hong Kong buyers expect "another leg down" for prices as transaction volumes
hover near record-low levels and deposit forfeits increase for the first time this
year, Samsung Securities Co said yesterday.

"We expect it will be increasingly difficult for developers to sell properties,"
Wee Liat Lee and Patrick Wong, analysts at Samsung Securities, wrote in the report.

Hong Kong's economy is sinking into a recession that is likely to last a year,
Daiwa Capital Markets economist Kevin Lai said yesterday. Gross domestic
product fell 0.5 percent in the second quarter from the previous three months,
seasonally adjusted, the government said yesterday.

Other market watchers were more optimistic. "China periodically undergoes cooling,"
said Simon Smith, Hong Kong-based head of Asia research at Savills Plc.
"I think previous growth will resume after six to eight months."

Ma remains upbeat about the long-term outlook for the Hong Kong market.
"My view is that the correction is only short-term," said Ma..

http://www.shanghaidaily.com/article/?id=479925&type=Business

[Ervins Dervish]

hkg govt auction only attract 1 bid last week - a sign of slowdown.