Hong Kong | Housing sales jump as first-time buyers given boost

Hong Kong’s move to make it easier for first-time home buyers to break into the world’s least-affordable housing market has had an immediate effect, with sales surging in the past two weeks.

Sales in the secondary market have more than doubled since mortgage rules for first-time buyers were eased mid-October, Midland Realty Ltd. said. Primary home sales are also doing well, with all 167 units at China Evergrande Group’s Emerald Bay project selling in six hours Monday, the Hong Kong Economic Journal reported.

The policy doubled to HKD8 million ($1 million) the amount a first-home buyer with a 10% down-payment could borrow, as the government tries to quell protests fueled in part by the city’s rising inequality.

“There is obviously a lot more interest from buyers now than before the new rule,” said Ivan Wong, an assistant district manager at Midland Realty. He said he began to receive more calls from clients the day after the policy change.

Meanwhile, sellers are acting as quickly as house-hunters. Asking prices have increased by 4%-5%, Wong said. “The sellers are now standing firm on their pricing. It’s harder to bargain.”

While property prices have been declining since often-violent protests erupted in June, the easing of mortgage rules has slowed the decline. Used-home prices slipped 0.14% in the week ended Oct. 20, the smallest drop in two months, data from Centaline shows.

Hong Kong may report negative growth this year as the economy reels from the social unrest, Financial Secretary Paul Chan wrote in a blog post on Sunday. The economy in Hong Kong contracted in the second quarter, almost certainly in the third quarter and the data are still deteriorating. The question is how deep and prolonged the pain will be.

Once Asia’s manufacturing powerhouse before the rise of mainland China, Hong Kong’s freewheeling consumer and finance-led economy is vulnerable to a potential collapse in confidence triggered by the turmoil.

The effects of the U.S.-China trade war combined with a lack of tourist spending power also raises the prospect of a contraction for the full year, compared with 2018. The downturn has been rapid, as declining exports and protests have erased any economic momentum from the start of 2019. Many economists see growth for all of 2019 sliding well below 1%. MDT/Bloomberg