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Hong Kong Property

Pressure on home prices in Hong Kong’s New Territories likely as supply builds up

PUBLISHED : Tuesday, 10 May, 2016, 5:53pm
UPDATED : Tuesday, 10 May, 2016, 5:53pm

About 108,000 new homes will come on stream in Hong Kong in the next five years, mounting pressure on prices, especially in the New Territories, say property consultants.

The latest estimate comes from international property consultancy Knight Frank. The estimate translates into about 21,600 new homes a year.

Late last month, a projection by the Transport and Housing Bureau said a record 92,000 new private residential apartments would become available in Hong Kong in the next three to four years.

Thomas Lam, head of valuation and consultancy at Knight Frank, said the supply is expected to rise in the next two years, estimating the number of new homes could reach about 38,000.

Most of the supply is expected in the New Territories, clustered in Yuen Long and Tseung Kwan O.

Hong Kong home prices to fall 19 per cent in the next 15 months, Nomura warns

“This is expected to bring downward pressure on second-hand home prices in these areas,” said Lam.

Meanwhile, in Kowloon, supply will be concentrated in Kai Tak. Last week, investment bank Goldman Sachs forecast a 20 per cent drop in home prices over 2016-2018 in Hong Kong.

The price drop is expected as interest rates are likely to rise and the prospect of any loosening of the government’s cooling measures in the near term is limited.

The US Federal Reserve raised the US interest rates for the first time in December, the first time in nearly a decade. It is expected to increase the rate by another 25-50 basis points this year.

“However, significant drops in Hong Kong’s home prices are unlikely as the impact on household mortgage repayment remains insignificant,” said Lam.

Hong Kong home prices contract for a fifth straight month in February

Knight Frank said the Hong Kong government is still taking a wait-and-see approach to the demands for relaxation of market cooling measures despite the recent drops in home prices.

In March, the average price index of private homes in Hong Kong fell 11.73 per cent from the peak level recorded in September, according to Rating and Valuation Department data.