Hong Kong’s home price index rose to the highest level in 10 months in June, as investors and speculators defied a third wave of coronavirus infections in the city in their search for safe haven assets amid a gloomy outlook for the global economy. June’s index of used homes edged up by 0.1 per cent to 386.1, according to figures by the Rating and Valuation Department, chalking the highest level since 388.2 in August 2019. The index dipped by 1.9 per cent compared with June last year. The coronavirus pandemic, which has sickened more than 3,000 people in Hong Kong and claimed 27 lives, also disrupted the city’s construction activity, cutting the number of new private residential units by 3,000 units to 92,000 for the next three to four years, according to data by the Transport an Housing Bureau. The drop in supply is helping to put a floor on home prices, analysts said. “It is hit by the pandemic [as] the progress of construction was delayed,” said Wong Leung-sing, senior associate director of research at Centaline Property Agency, adding that the supply of new homes may fall below 90,000 units. “The epidemic has dragged down the sales of new homes, and the supply of new homes in the future will begin to decrease, which is a self-correction in the market.” The prices of lived-in and newly launched homes are hanging on stubbornly in the world’s most expensive urban centre, even as its economy is mired in its worst recession on record. A flood of cheap liquidity unleashed by central banks has driven investors to search for better returns in fixed assets and precious metals, prodding them to snap up new apartments during weekend launches . The latest data is not “reflecting the impact from the recent uptick in virus infections,” said Thomas Lam, executive director at Knight Frank, which expects home price to drop by about 5 per cent this year. “Correction in the property market is likely to continue.” Buoyant home prices have arrested the slide of mortgage borrowers into negative equity, where the value of assets fall faster than their borrowings. As many as 127 mortgage borrowers were in negative equity in June, compared with 384 at the end of March, with the aggregate value falling to HK$727 million from HK$1.867 billion during the period, according to data by the Hong Kong Monetary Authority (HKMA). At the bottom of Hong Kong’s real estate market in 2003, a record 105,697 cases of negative equity was recorded. “The current cases are peanuts compared with 2003,” said Eric Tso, chief vice-president at mReferral Mortgage Brokerage Services. “The bounce in home prices helped reduce the number of the negative mortgages during the quarter. Looking ahead, the third quarter is full of uncertainties due to the third wave of the pandemic in July. The number of completed, but unsold properties rose slightly by 1,000 units to 11,000, the highest quarterly level in 13 years, said Centaline’s Wong. The total number of flats that start construction and to be completed this year will also miss their targets as the pandemic drags on progress. To be sure, the growth in prices has slowed, compared with the 2.2 per cent increase seen in May, as the coronavirus outbreak took hold, said Derek Chan, head of research at Ricacorp Properties, adding that a decline of between 0.5 and 1 per cent will be seen in July while August will see the fall widened to over 2 per cent.