The founder and Chief Executive of Centaline Property Group, Shih Wing-ching, says he expects at least a 15 percent fall in local property prices over the next 12 months due to higher interest rates. The US Federal Reserve looks set to increase rates again next week to damp down inflation, while in Hong Kong One-Month Hibor - a key mortgage rate - is already at a 29-month high.
"It depends on how the government is going to react. At this moment, I think the correction will be more than 15 percent," Shih said while appearing on RTHK's Money Talk programme. When prompted for a time frame, he said "over the next year."
Shih also called on the government to take a fresh look at stamp duty, additional levels of which have been brought in over the years to calm a market boosted initially by short term speculation, then mainly mainland capital and ultra low interest rates in the wake of the 2008 financial crisis.
"I think the government shall understand the market has changed because a lot of policy in the past - trying to block the capital entering into the market," he said. "We have very high stamp duty so not only the speculators are not allowed to go into the market but even investors, especially the foreign investors, are blocked from the market."
In 2010, the government introduced the Special Stamp Duty to stop short-term speculation. About two year's later, it brought in the Buyer's Stamp Duty, a charge on top of standard, or Ad Valorem, stamp duty on the purchase of a property. It is paid by non-permanent residents. The government then clamped down on Hong Kong permanent residents buying second properties by ramping up their Ad Valorem stamp duty rate.
But in spite of the measures, property prices have risen steadily over the past decade, making housing a political hot potato. Subsidised housing development launches are often massively oversubscribed and long waiting times for public housing have led to a surge in sub-divided flats.