Hong Kong home prices slip again, security law may keep the lid on market recovery, analysts say
- Prices slip in April after a small gain in March, according to government data
- The plan for national security bill could derail signs of market appetite after encouraging home sales in recent weeks
The index for used homes fell 0.13 per cent, according to data released by the Rating and Valuation Department on Friday. This reversed a 0.7 per cent gain in March. The gauge has now retreated 5.3 per cent from the peak in May last year.
“It is uncertain now. The market is volatile,” said Derek Chan, head of research at Ricacorp Properties. “If buying confidence is again dampened by the impact on economy after the security legislation and US actions, home prices may come under pressure.”
More than 360 people were arrested this week in street protests against the national security plan, stoking concerns more unrest will grip the city.
That latest upheaval could chip away at tentative signs of revival in the world’s least affordable housing market even as the government unveiled a record expansionary budget to revive the economy.
02:33
China’s top legislature approves national security bill for Hong Kong
“The correction in the housing market is likely not done yet,” said Thomas Lam, executive director at property consultancy Knight Frank, who expects prices to weaken 5 to 10 per cent this year because of social instability. “It’s just that there are slim chances of big corrections.”
Home prices are likely to retrace by 10 per cent this year, said Billy Mak, associate professor at the department of finance and decision sciences at Baptist University in Hong Kong.
“After all, the economy is under pressure,” Mak said. “If home prices are positively correlated to the economy, they are likely to slowly adjust downwards. The adjustment does not mean the market is falling off a cliff, he added.
Goldman Sachs forecast home prices to decline 25 per cent from mid-2019 to trough if the economic impact of Covid-19 stretches into the third quarter and social disruption escalates. The city’s economy is officially forecast to shrink by 4 to 7 per cent this year, due to the twin blow of public health and political crises.
Mak also noted some Hongkongers seeking to emigrate tended to cash in and sell properties more cheaply as political tensions throttle the economy. If the number of such sellers increases, home prices are likely to suffer, he added.