Comparison of primary and secondary markets

Ocean Pride

Last month saw two new developments located in Tsuen Wan and Kai Tak enter the market to an extremely warm reception. Tsuen Wan’s Ocean Pride development received a staggering 13,000 offers, while only 496 units were available, making successful buyers feel like lottery winners. Even though most buyers were young, three-bedroom units were the first to sell out, thanks to the 15% stamp duty as a “spicy measure” introduced by the government. In those cases, while the young buyers were the ones signing the papers as first-time homeowners, it was actually their parents bankrolling the purchases. First-time buyers enjoy the exemption of stamp duty but such benefit only applies once, therefore these buyers prefer purchasing a larger three-bedroom unit, which has a cheaper price per square foot and a higher investment value. As developers offer an 85% mortgage rate, buying bigger homes can also mean taking a bigger risk, but perhaps it is difficult to analyse risks rationally when standing amidst the crazy primary market.

>> More information on this property:Ocean Pride

On the other hand, the transaction volumes in the secondary market continues to shrink. Theoretically, as second-hand buyers are now drawn towards the primary market, there should be a price drop in the secondary market, but we have seen the opposite happen. Property owners, upon seeing the popularity of the primary market, often raise the prices to block the transactions. Right now, in the secondary market, the number of offerings are diminishing at a faster rate than the dwindling number of buyers, while the new price record keeps being reset. Even the 15% levy, enforced last November, has done little to stop the price hike, which has continued for 13 consecutive months so far. Given the current situation, will the government play down the “spicy measures”? Will it increase the stamp duty to 30%? Or even introduce a purchase ban?

When the stock or property market enters an excess phase, people tend to only respond to good news and ignore the warnings. While buyers are not willing to afford the harsh 15% levy, they find ways to enter the market as first-time home owners. Therefore, I am confident to predict that the government is unlikely to achieve much by simply introducing more “spicy measures.”

What I want, however, is for the government to own up to their missteps and to thoroughly review their housing market strategies. Most of the market’s new offerings are small units, and yet these units are getting increasingly unaffordable. The measures are becoming more restrictive, so why is it that small unit prices are way ahead of large unit prices? Could it be the repercussions of the government’s measures? The housing market is a massive problem that Hong Kong needs to address - but with the right approach. If we try to tackle the issue the wrong way, the result may very well backfire.

>> Other issue: Mainland houses with great landscapes