Hong Kong’s home sales jumped to the highest level in five months as an economic rebound and the lowest borrowing costs in at least 20 years spur demand.
Sales rose 13 percent to HK$40.8 billion ($5.25 billion) in February from the previous month, the Land Registry said today on its Web site. The number of transactions climbed 10 percent to 11,733, the government agency said.
The jump in home-buying underscores concern that the property market may overheat after prices surged 29 percent last year. The government raised taxes on luxury-home sales and pledged to boost the supply of apartments after reporting an acceleration in fourth-quarter economic growth last week.
“With the economic recovery and a low interest rate environment, it’s hard to put a bearish feel on the property market,” Buggle Lau, chief property analyst at realty company Midland Holdings Ltd., said by phone today. The gains will be sustained “unless we see rates increase significantly, or the government introduces more measures,” he said.
Hong Kong banks are offering home loans at interest rates that are the lowest in at least 20 years. Hang Seng Bank Ltd., the city’s second-biggest provider of such loans, said yesterday that Hong Kong mortgages will erode profitability if borrowing costs are further reduced.
“Mortgage rates are already at a very low level and banks need to be able to make a reasonable profit,” Hang Seng Chief Executive Officer Margaret Leung said at a briefing yesterday.
The government will raise taxes on luxury-home purchases for the first time in more than a decade. Stamp duty on homes selling for more than HK$20 million will rise to 4.25 percent from 3.75 percent, Financial Secretary John Tsang said Feb. 24. The move comes after buyers of luxury properties were undeterred by an October increase in down-payment requirements to 40 percent from 30 percent.
Tsang also said measures could be extended to cheaper properties “if there is excessive speculation.”
Hong Kong residents are buying lower-priced homes after the government measures, said Cusson Leung, an analyst at Credit Suisse Group AG.
“If the mass-market property prices rose too much, such as beyond 15 percent, the government will act,” Leung said, adding that mass-market homes are those costing below HK$8 million each.
While the government is concerned about the risk of a property bubble, data is yet to show that the city has one, Tsang said on radio on Feb. 25.
Economic growth in Hong Kong, a trade and financial hub for China, beat estimates in the fourth quarter as the city’s gross domestic product rose a seasonally adjusted 2.3 percent from the previous three months, Tsang said Feb. 24. Exports jumped 18.4 percent in January from a year earlier, the biggest gain since 2006.
Transactions for homes valued at between HK$5 million and HK$10 million rose 10 percent to 1,163 in February, the Land Registry said today. For those worth at least HK$10 million each, the transactions gained 30 percent to 546.
The sales were mainly driven by buying of existing homes in January, given the lack of new projects being launched, Lau said. The Land Registry doesn’t break down data between new and existing homes.
“The secondary market is dominated by the lower-priced homes, where a lot of the buyers are locals,” he said.
Transactions of existing homes rose 15 percent in February from January, while by value, they gained 19 percent, he said, citing Midland’s figures.
The value of existing home sales reached HK$1.52 billion in February, a record since November 1997, Centaline Property Agency Ltd., one of Hong Kong’s biggest, said in an e-mailed statement today. Sales jumped 150 percent to 960 in February, from 370 in January 2009, the agency said, citing data it compiled.
“There are still a lot of options for second-hand homes worth less than HK$1 million in the New Territories, which would be the top choice for young, first-time buyers,” Louis Chan, Centaline’s general manager of residential properties, said in the statement.
--With assistance from Nipa Piboontanasawat in Hong Kong. Editor: Andreea Papuc