Hong Kong’s home prices rose in July, approaching an all-time high, as property buyers gained confidence from signs of economic revival in the financial hub while the government stepped up efforts to contain the coronavirus pandemic. Prices of lived-in homes increased 0.5 per cent to 396.3 in July, according to an index published by the Rating and Valuation Department on Friday. They have rallied every month this year, for a cumulative 4.3 per cent advance. The index reached an all-time high of 396.9 in May 2019. An index tracking rental prices rose 0.5 per cent in July, capping a 3 per cent jump in a five-month rally, the department added. “It is now on the verge of breaking the record” despite the negative impact of a stock market slump, said Willy Liu, chief executive at Ricacorp Properties, who remains bullish on the outlook. “It should reach a new historic level in the third quarter.” Hong Kong’s economy expanded 7.5 per cent in the second quarter, following a 7.9 per cent rebound in the preceding three months. Months of social stability helped shore up confidence, and homebuyers snapped up new units in fear of missing out on the rally, while big developers paid top dollar at government land tenders. Still, the speed of market recovery is slower than predicted, as some property analysts had previously expected the record to be broken by midyear. Part of the reason is the catastrophic slump in Chinese tech and education stocks amid China’s regulatory clampdowns. The Hang Seng Index sank 9.9 per cent in July, wiping out more than HK$6.2 trillion (US$797 billion) in value across the entire market, according to data published by Hong Kong Exchanges and Clearing. The benchmark last week slumped by more than 20 per cent from its mid-February peak , plunging it into a bear market. The blow to investors’ wealth dented purchasing power and buying interest, while existing owners bumped up their asking prices at the same time, Liu added. The local housing market is taking a breather, as transaction volumes have almost reached the full-year total of 2020, he added. “Some investors have seen their funds evaporate in the stock market,” he said. With fewer buyers entering the market, the upwards momentum for home prices will slow down, he said. “The increases in prices by homeowners are relatively large so buyers are taking their time to digest the situation.” For instance, Island Garden in Shau Kei Wan, Hong Kong Island, saw a flat measuring 1,017 square feet changing hands for a HK$1.99 million (US$254,877) loss in late July. The owner slashed the asking price to cover for “major fluctuations” in the stock market, according to Michael Lee, an assistant sales director at Midland Realty. For now, however, optimism remains intact with some parts of the housing market looking brighter than others. At present, wage earners are dominating the market, making small to medium-sized units among the better performers, said Thomas Lam, executive director at Knight Frank. In particular, a sub-index for homes measuring less than 1,076 sq ft recorded as much as a 1.1 per cent gain in July, while prices for units larger than that declined by as much as 1.9 per cent. Weekly price indices compiled by Centaline Property Agency and Midland Realty have set new records in early August. Growth in home prices could cool off even if it surpasses the current records compiled by the government, Midland Realty said, due to fluctuations in the local pandemic situation and pressures from an emigration wave. It will take a wider reopening of the border with mainland China to sustain any rally, the firm added. Midland is keeping to its forecast for an annual growth of 13 per cent in prices this year, aided by factors including easier mortgage financing rules, the improving pandemic situation and demand from so-called “new Hongkongers” – mainland citizens taking up residency in the city.