Hong Kong apartment prices fall flat


It's all downhill for Hong Kong property prices -- from the Peak, one of the city's most expensive neighborhoods, at least

By Alex Frew McMillan

HONG KONG, China -- The value of Hong Kong's property sales fell 13 percent in 2001, new figures show.

In all, HK$193 billion ($24.7 billion) in property changed hands over the year, data from two Hong Kong realty agencies indicate.

The total number of properties sold for the year rose 2.8 percent, to around 88,000. That was the first rise in four years, according to the realtors, Midland Realty and Centaline Property Agency.

But the volume was still coming off a low base, leaving 2001 as the second-slowest year in the last decade.

Hope started to spring toward the end of the year that the Hong Kong property market had hit its lowest level and was starting the long climb back.

Low-end look was very 'in' last year

The agencies report that home buyers have switched to the lower end of the market.

Property is a vital commodity in Hong Kong's tight market. But prices have dropped dramatically since the Asian financial crisis and Hong Kong's handover to China.

A glut of new development came on the market after Hong Kong's new government freed up large tracts of land for sale.

That hit at the same time that closer ties to China lured thousands of Hong Kong citizens to buy homes in mainland China -- where prices are a fraction of Hong Kong's inflated rates.

The price slump has left many apartment owners with negative equity. In other words, they owe more on their homes than they are worth.

That "negative wealth" effect has compounded deflation, which has set in as the former British colony's economy slows down.

'Notice the flow'

Centaline's figures showed that overall residential property fell 9 percent in value for 2001, compounding a 15 percent drop in 2000. They were based on sales of existing homes, but reflect new property sales, too.

Development companies drove the decline in prices, the agency suggests, with heavy discounts on new apartments and attractive mortgage deals.

Midland Realty noted that home buyers have graduated to cheaper apartments. Luxury-flat sales fell 48 percent, while sales of flats worth less than HK$1 million ($128,205) rose 30 percent.

Most homes are flats in high-rise apartment buildings in Hong Kong, where the skyline is wave upon wave of concrete skyscrapers, set against a hilly backdrop and the South China sea.

Property companies often move the main Hong Kong stock index, the Hang Seng. It was Asia's worst performer last year, falling 24.5 percent.

Property stocks were mainly down on Thursday afternoon. Sun Hung Kai Properties was down 0.79 percent at HK$63.00. Henderson Land dropped 1.15 percent to HK$34.50.

In the last hour of trade, the Hang Seng property index was down 0.79 percent.