Flat sizes have already shrunk about 40% in six years.
The new vacancy tax could urge developers to build smaller flats as shield against the sell-through rates, JLL said. The firm thinks that the pre-sale consent scheme could slow down the upward trend of the housing prices for H2 2018.
The firm noted that the average size of new flats shrank about 40% over the past 6 years.
According to the firm, smaller units have pushed strong sales in the primary market in H1 2018 as developers were able to sell over half of units launched at most new projects.
Amidst the new government measures, JLL thinks that housing prices could further go up 7% in the next six months.
“Under the new tax, developers will adopt a more cautious pricing strategy in new luxury launches to ensure all units are sold,” JLL managing director Joseph Tsang said. “Mass residential projects, on the other hand, are likely to be less affected given the sustained demand for smaller units.
Tsang thinks that developers are also likely to be less aggressive when bidding for sites in the future to offset the additional development risks brought about by the new tax.
“However, whether lower land prices will translate into lower housing prices will depend on prevailing market sentiment,” he added.
Tsang believes that housing prices will ease in the second half of the year due to interest rate hikes and increased volatility in equity markets.
In late June, the government revealed six new initiatives to counter the city’s housing woes including the speculated vacancy tax for the primary market. The Transport and Housing Bureau reported unit vacancies reached 9,000 vacant units in the primary market at the end of 2017.
Do you know more about this story? Contact us anonymously through this link.