On a slippery slope
Measures to cool housing market put jobs at risk
Faced with an overheating residential property market, the government launched a series of measures earlier this year to cool things down. As a result, the monthly transaction volume of residential properties in Hong Kong has dropped from 7,000 in February, when the government's latest measures came into effect, to just 4,500.
"There has been a big impact on the real estate industry," says Joseph Tsang, managing director and head of capital markets at Jones Lang LaSalle. "Because of the drop in transaction volume, real estate agents are finding it difficult to do business. Currently, we have over 30,000 property agents in Hong Kong. Going forward, if the situation continues, we will see at least one-third of these people losing their jobs over the next 12 months."
Real estate agents are the most affected by the current downturn and many are leaving the industry. But many other workers are also caught up in the downturn, such as architects, designers, renovators, furniture sellers and construction workers. While their jobs might not be under immediate threat, it is very likely that they will start to feel the effects if transactions don't start to recover soon.
"If the current situation continues, the spillover effect will be serious," Tsang says. "It's going to affect a much wider spectrum of people."
In terms of organisational structure and staffing, Jones Lang LaSalle has not been as seriously affected as agencies with a narrower focus. Its business covers a variety of services, including valuation, capital investment, international properties and property management. "Hence, we are in a different position from those focusing solely on residential and commercial sales and leasing," Tsang says.
The property market started to heat up significantly after the recent financial crisis. Sales activity started to rise in the residential market because of factors such as rock-bottom interest rates pegged to those in the US. There was also pressure for prices to go up because the supply of land was insufficient to meet demand.
"As a result, the government has been trying to calm the market down by imposing quite a lot of cooling measures," Tsang says. "Some of these measures may have been good in helping the market to cool itself down. However, some of them have proved very harsh for end users wanting to buy properties. As a result, we have seen a substantial drop in sales activities ever since the beginning of this year."
Because of these measures, the residential market is no longer as liquid as it was before. Tsang believes that the government should review some of these measures and consider removing them when there are signs that the market has stabilised.
"There are two specific measures that need to be looked at," he says. "One is the loan-to-valuation ratio instituted by the Hong Kong Monetary Authority to control how much money you can borrow from a bank to buy a property. The authority keeps reducing the ratio. The latest is just 40 per cent, down from 70 per cent a few years ago."
The other measure Tsang thinks should be looked at again is the double stamp duty for buyers, excluding first-home purchasers, which was put into effect in February.
Despite these concerns, Tsang remains bullish on the long-term prospects of the property market, though he does say that people wanting to enter the field should carefully consider their timing.
"Overall, the long-term prospects are still good," Tsang says. "But anyone wanting to enter the field should be aware of the direction that the property market is moving in before making up their minds."