More bad news for Hong Kong property buyers

Property prices to keep increasing for the rest of the year.

Property consultancy firm Colliers International also said potential buyers will bear greater transaction costs to enter the market as the expectation of returns is sustained by positive economic news.

Colliers said rental rates are likely to increase as a result of higher demand, which will mean a failure of the latest cooling measures imposed by the government this February.

The Hong Kong Monetary Authority introduced a further round of cooling measures to curb local investment demand. These measures included the doubling of the ad valorem stamp duty on most property sales and tightening the requirements for the approval of mortgage loans.

After previous cooling measures, potential buyers factored in additional charges into their overall acquisition costs with the expectation that further capital appreciation will remain intact. As a result, property prices began to rise again despite mild corrections after the imposition of each new cooling measure.

Colliers predict the same outcome for February’s cooling measures despite a doubling of the stamp duty.

Less expensive properties are likely to become more appealing to investors as a result of the differences in stamp duty between price brackets. Colliers predict that this will enhance market segmentation and cause greater price growth in the lower-price bracket.

Colliers said many vendors are likely to enjoy robust potential capital growth on their property assets since interest rates are unlikely to rise to the same levels that they were before the global financial crisis. As a result, there is little incentive for sellers to implement discounted rates.