Hong Kong home prices approach all-time high as analysts see headwinds toward year-end
- Prices of lived-in homes have risen by a cumulative 4.3 per cent in a seven-month rally to within all-time high set in May 2019
- Ricacorp expects the record to be broken later this year even as headwinds from stock market swoon and emigration wave loom
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.”
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 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.
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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.
