Hong Kong home prices rise for 13th straight year, with rising trend likely to sustain if city brings fifth wave of Covid-19 outbreak under control
- The index for lived-in homes in December fell about 0.3 per cent to 392.5 from November, but rose 3.3 per cent on an annual basis
- The index retreated 1.4 per cent in the fourth quarter after reaching a record high in September
Hong Kong’s home prices rose for a 13th straight year in 2021 even as prices declined for a third consecutive month in December, according to an index published by the city’s Rating and Valuation Department.
The index for lived-in homes in December fell about 0.3 per cent to 392.5 from the previous month.
Since September, when the index reached a record high of 398.1, it has retreated 1.4 per cent. But on an annual basis, the December reading was 3.3 per cent higher compared with 379.9 a year earlier. The decline in December home prices coincided with the city starting to see the first signs of the fifth wave of the Covid-19 pandemic, after more than six months of nearly zero local cases.
“As long as the pandemic does not worsen further, we are confident of the overall residential property market,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank. The property consultancy expects mass market residential prices to rise by as much as 3 per cent this year and luxury housing prices to increase by 3 to 5 per cent.
Although the pandemic has not had a big impact on property prices, Wong said the market will undergo a period of adjustment over the next month or two that will cause transaction volumes to fall.
The latest surge in infections in the city had slowed down the launch of new projects by developers because of the government’s social distancing measures, but any new launch was likely to be sold out, he said.
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Wong said the impact from the imminent interest rate increases by the Federal Reserve on Hong Kong’s property market will be muted, noting that the city was unlikely to follow the pace of US rate increases due to local economic conditions.
Hong Kong usually follows the Fed’s moves because of its fixed exchange rate system.
“The actual mortgage rate in Hong Kong in the next 12 months will still be below 2 per cent, which is lower than the rental yield, encouraging buyers to purchase properties.”
Meanwhile, the home price index of two leading Hong Kong property agents, each tracking deals in over 100 housing estates, recorded higher price growth compared with the official government index in 2021.
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Centaline Property Agency’s Centa-City Leading Index showed secondary home prices rose 4.8 per cent last year, while Midland Holding’s Midland Property Price Index gained 4.97 per cent.
Albert Wong, honorary consultant at AAHorses Mortgage Brokerage Services, said the falling price trend in the last quarter suggests a flagging momentum in the property market and that home prices were likely to fall by 20 per cent in the next two years.
“Homebuyers should take reference of the government data, which covers all residential secondary transactions in Hong Kong, as this accurately reflects the price trend,” he said.
“Home seekers need not hurry in making a decision to buy simply by referring to some indices that are subject to short-term [weekly] fluctuations.”
