Hong Kong's property setback has raised eyebrows across the border, with mainland investors worrying about whether their nest eggs will be in trouble.

But, market experts have been quick to assure that any negative impact on properties in the Pearl River Delta (PRD) would be minimal despite heightened speculative activity on the mainland.

Hong Kong's housing market - once dubbed as the world's most unaffordable - peaked in September last year before going into a steep 8-percent fall in the fourth quarter after having gained more than 370 percent in the past decade, according to recent reports.

Sales of new and secondary homes in January plunged to 3,500 units - the lowest monthly level since 1991 - according to Centaline Property.

Some mainland investors and experts are worried that the SAR's real-estate retreat would erode the value of homes in the PRD, particularly in Shenzhen, which has a substantial portion of Hong Kong homeowners.

Pu Dongjun, an analyst with ChangJiang Securities, said pressure in the real-estate sector in first-tier cities has aggravated after property prices in Hong Kong started heading south, due to the mainland market's close economic ties with the SAR.

He said housing prices in Beijing, Shanghai and Shenzhen are at risk of a pullback in the short term, with Shenzhen particularly vulnerable.

Shenzhen is already approaching Hong Kong's levels in the macroeconomy and financial behavior, such as the property industry's contribution to the local GDP and the percentage of secondary homes sales against overall transactions, Pu said.

According to a report by Changjiang Securities, the property markets in the four most developed mainland cities are turning into a "sales dominated" market from a "transfers dominated" market, with Shenzhen bearing the greatest resemblance to Hong Kong's. The housing sector's contribution to the GDPs of Shenzhen and Hong Kong has lingered around 10 percent in the past decade, while the percentage of secondary homes sales in Shenzhen has reached 50 percent in recent years.

Yang Hongxu, deputy director of the Shanghai-based E-house China Research and Development Institute, agreed that Shenzhen will be the first to feel the pinch from a property plunge in Hong Kong.

He Qianru, director of the research center at Midland Realty, however, pointed out that despite the geographical proximity of the two cities, their property trends are different as they are dictated by different factors.

According to Midland Realty, prices of new apartments in Shenzhen soared 52 percent last year, and are projected to rise a further 10 to 15 percent in 2016.

Prices of new apartments in Shenzhen also set a new record of 46,515 yuan ($7,100) per square meter in January - up 74.27 percent over the same period last year - data from the city's Urban Planning, Land and Resources Commission show.

Midland Realty expects the Shenzhen market to see prices going up by a further 10 to 15 percent, while ratings agency Standard & Poor has forecast an average home price drop of 10 to 15 percent in Hong Kong this year and a further fall of 5 percent in 2017.

Song Ding, a senior analyst at the Tourism and Real Estate Industry Research Center of Shenzhen-based think tank China Development Institute, said: "The percentage of speculators is usually about 10 percent in the property market, but it had reached 30 percent in Shenzhen last year."

Midland Realty's He believes the impact from sliding homes prices in Hong Kong would have limited effect on the Shenzhen market as Hong Kong investors' contribution to the overall market is limited with Shenzhen allowing each Hong Kong citizen to purchase only one residential unit.

grace@chinadailyhk.com

Declining property prices in Hong Kong have sparked concern among investors on the Chinese mainland over whether the setback would have a big impact on the housing market across the border. Asia News Photo

(HK Edition 02/23/2016 page8)