Hong Kong’s Property Curbs Hurt Furniture Sales

September 4, 2013, 4:52 PM

Hong Kong’s Property Curbs Hurt Furniture Sales

For a sense of how Hong Kong’s overheated property market is slowing, look no further than furniture sales. Census data this week showed the city’s sales volume of fixtures and furniture—including things like lamps and sofas—slumped 12% in July from a year earlier. That was the biggest decline in a year, and followed a 3% drop in June. Wong Cheung-choi, 60, who has run a furniture shop in Hong Kong’s Western district for the past 13 years, said he has noticed a slowdown in sales this year. Mr. Wong blamed the decline in sales on the city’s aggressive property cooling measures, and said his business is having the toughest year in more than a decade.“Fewer people are buying or changing apartments, weighing on the demand for furniture. I don’t expect a turnabout in the near term,” Mr. Wong said, adding that his business now is worse than even in 2003, when severe acute respiratory syndrome (SARS) hit the city, devastating local businesses.

Government statistics back up Mr. Wong’s complaints. Property transactions dropped sharply both in number and value in August. There were just 3,400 transactions in the residential property market last month, down 58% from a year earlier and 15% from July. Likewise, official data show the total value of residential property transactions in August was HK$19.6 billion ($2.53 billion), down 51% from a year ago and 7% from the previous month.

“Transactions have virtually stagnated as both buyers and sellers have stayed on the sidelines,” said Kevin Lai, a Hong Kong-based senior economist at Daiwa Securities. “One of them will have to throw in the towel. I bet it’ll be the sellers,” said Mr. Lai, who said he expects sellers to increasingly cut prices in order to attract greater demand.

The city’s home prices have more than doubled since 2008, fueled by ultra-low interest rates and waves of mainland Chinese buyers. In recent years, the government has launched multiple rounds of cooling measures to try to bring down prices, including the introduction of higher down-payment requirements and extra taxes designed to deter foreign buyers and speculators.

Most recently in late February, the government doubled the stamp duty on most property purchases, prompting transactions on the secondary market to plummet. The series of tough curbs managed to slow the growth of Hong Kong’s home prices to a comparatively weak 8% in the first seven months this year, compared with a 26% rise in 2012, according to official data.

“Looking ahead, the property market’s downside risks will apparently outweigh the upside, unless policy makers are willing to act flexibly,” said Raymond Yeung, a senior economist at ANZ, who like Mr. Lai said he expects prices to take a hit in the coming year.

Furniture sellers aren’t the only ones in Hong Kong complaining about the government’s cooling measures. Earlier this year, thousands of property agentsmarched to protest the measures, saying the stall in the market may cost them their jobs.