Hong Kong Property Sales Plummet

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Hong Kong property sales are down 60 percent from a year ago, providing the first clear evidence that new government policies are slowing down one of the world's hottest markets.

The Hong Kong Lands Registry recorded about 4,400 sales in April, worth a total of $4 billion, a 48 percent decrease from the year before, CNN reports.
 
"I'm not surprised...this is largely due to the measures implemented by the government," Buggle Lau, chief analyst for strategic development and research at Midland Realty, told CNN.

With the new government regulations introduced last month requiring larger down payments and a 20 percent capital gains tax, some have said Hong Kong's property boom may be over. In some circumstances the costs associated with buying a home have risen 40 percent.

Sales of luxury homes found in Hong Kong's prime districts, where homes are priced around $2.5 million and above, have been directly affected, analysts say. Buyers from China's mainland, one of the key buying groups, have largely disappeared, agents say.

At the same time, many owners are simply not putting their homes on the market, preferring to wait to gauge the full impact of the government measures.

"Two years ago, we would normally have 10 to 15 luxury home sales every week. Now it's less than five," Simon Lo, executive director of research and advisory at Colliers International in Hong Kong, told CNN.

With lower demand and limited supply, analysts are predicting price drops for Hong Kong, after years of double-digit annual price hikes.  

The latest government actions have sent ripples through the industry, including some unintended consequences. A recent report suggested couples are divorcing to avoid the capital gains tax and property developers are consolidating and looking to new markets.