Price drop projected even if property spicy measures scrapped

Michael Shum

Property prices could still drop 5 to 10 percent even if all market cooling measures are lifted when the budget is delivered tomorrow, investment bank UBS predicts.

This comes as reactions were mixed to the government’s reported plan for monthly fireworks and drone shows to lift Hong Kong out of the doldrums.

UBS said it expects the government to remove all residential-related stamp duties and introduce more measures to attract mainland tourists to Hong Kong in the 2024-25 budget.

”The removal of stamp duties will provide a one-off boost to property developers’ share prices and the real estate market, but the positive market sentiment may not last,” it said.

”Even if all market cooling measures are scrapped, property prices will still drop by 5 to 10 percent compared with last year.”

UBS said the supply of residential flats remains sufficient, expecting around 51,000 first-hand homes to be put up for sale this year.

”That means it will take more than three years for the market to digest the inventory,” UBS said. “In a tight credit environment, highly leveraged real estate developers may lower prices to accelerate cash flow.”

In addition, the deficit between rental yields and mortgage costs continues to dampen investment demand, with the bank expecting the property market to continue facing challenges in the first half of the year.

But market sentiment “might improve in the second half if residential rental returns recover further, combined with a fall in mortgage rates,” it added.

UBS expects no cash or consumption voucher handouts this time around – a negative signal to local consumption.

The reported plan to roll out monthly fireworks and drone shows at Victoria Harbour received a mixed reaction.

A politician, who spoke on condition of anonymity, told The Standard he has heard the monthly fireworks will be half the length of the 23-minute-long Lunar New Year show. He believes it is wasteful, given the government’s over HK$100 billion fiscal deficit, and bad for the environment.

Sara Leung Fong-yuen, who chairs the Hong Kong Tourism Industry Employees General Union, said visitors will find it boring if the fireworks show is held monthly.

”I don’t think a monthly show will draw as many visitors as the Lunar New Year one. I also don’t think visitors would fly to Hong Kong especially for it,” Leung said.

But Timothy Chui Ting-pong, executive director of the Hong Kong Tourism Association, disagreed, saying tourists “will be happy to see the shows, which will put Victoria Harbour’s charm on full display.”

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