While Hong Kong continues to experience persistent rain, the top ten housing estates keep low transaction volumes, exposing that the secondary market has entered the second phase of a bear market. Meanwhile, all units in both phases of Sun Hung Kai Properties' new development, The Garden Residency in Kam Tin North, Yuen Long, have been sold out. This reinforces the market's belief that the bear market in the secondary market does not affect the strong sales of new primary markets.
The Garden Residency was launched in two phases, but the second phase saw a price reduction of approximately 6%, bringing the price per square foot to HK$13,179. Sun Hung Kai Properties typically increases the price per square foot by 2-3% with each phase, making this unusual move for specific reasons.
Prior to The Garden Residencys launch, their other development, Silicon Hill in Pak Shek Kok, recorded 21 cases of forfeited 
deposits, totaling HK$18.35 million, with each defaulted deal involving a deposit equivalent to 10 to15% of the property price. Among these, a three-bedroom unit saw a failed booking of HK$1.71 million. To avoid influencing The Garden Residency s launch, Sun Hung Kai Properties drastically reduced prices for the second phase, revealing their focus on increasing sales volume. The government had previously announced the construction of the Pak Shek Kok MTR station to resolve the transportation bottleneck for properties in the area. Despite this news, 21 cancellations were still recorded, showing weak buyer confidence.
The central government had previously announced stricter scrutiny of funds flowing into Hong Kong for stock and property speculation starting in July. This measure speedily froze secondary market transactions, and new transactions also plummeted by 60%. On July 24, the central government further announced that overseas trust funds held by Chinese residents would be subject to a 20% capital gains tax. This measure will quickly have a severe impact on Hong Kong's luxury housing market. In fact, such funds have always been the main buyers of luxury homes. Now, with a 20% capital gains tax rate, their purchasing power has naturally decreased significantly.
The central government's simultaneous use of two strict measures to suppress the property market has brought secondary market transactions to a near standstill, with new home transactions falling by 60%. Clearly, after a 30% drop and a 10% rebound, property prices have now entered the second phase of a bear market. How much will they fall? Approximately 5% in the second half of the year, and if the Federal Reserve raises interest rates in September, another 10% drop next year.
