Hong Kong housing market is likely to start the Year of the Tiger with a purr rather than a roar, say analysts

The omicron strain of coronavirus and the spectre of interest rate increases may dampen sentiment in the early stages of the Lunar New Year
The Year of the Ox was as strong as its name suggests when it came to sales of second-hand homes

Hong Kong property

Lam Ka-sing

Published: 10:00am, 2 Feb 2022

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The Year of the Tiger does not herald a roaring start for Hong Kong’s housing market, according to analysts.

The omicron strain of coronavirus currently plaguing the city and the spectre of interest rate increases are likely to dampen sentiment in the early stages of the Lunar New Year.

The Centa-City Leading Index (CCL), a gauge of lived-in home prices compiled by Centaline Property Agency, will fall about 2.1 per cent by the end of February, said Wong Leung-sing, senior associate director of research at Centaline.

“The impact on local housing prices, from the January 27 US Federal Reserve hint of an interest-rate increase in March, and the government’s extension of social distancing measures to February 17, will only be reflected in the CCL in late February,” he said.

The index rose 5.3 per cent in the Year of the Ox, to 185.93, as sales of second-hand homes soared. Wong’s prediction would mean the index will fall to as low as 182 in late February.

“The Year of the Tiger is approaching,” he said. “Looking forward to the seasonal boom after the Chinese New Year, housing prices will hopefully resume their upwards trajectory after the adjustment and regain lost ground in the Autumn, around Mid-Autumn Festival.”

Wong’s view is echoed by Derek Chan, head of research at Ricacorp Properties. Home prices may fall 2 to 3 per cent between January and March, before a possible recovery after the pandemic eases, he said.

Chan is optimistic about the Year of the Tiger as a whole, however, forecasting an 8 to 10 per cent gain in home prices for the full year, driven by the shortage of housing and a slower pace of interest rate rises in Hong Kong.

The three biggest local property agencies all saw a dive in the number of viewings during the last weekend of the Year of the Ox.

A three-bedroom flat measuring 644 square feet at Belvedere Garden in Tsuen Wan changed hands for less than a two-bedroom unit. It sold for HK$6.18 million, a 12 per cent discount to the asking price, because of the pandemic and the fact the owner is emigrating, according to Centaline.

Chan said rents will also fall 2 per cent in the first quarter of the year, before rebounding some time in the summer.

Investment banks Morgan Stanley and UBS have predicted that Hong Kong’s home prices could fall this year between 2 per cent and 5 per cent, respectively.

The city’s tough Covid restrictions, which have wreaked havoc on various strands of the economy, are being eased somewhat. Chief Executive Carrie Lam Cheng Yuet-ngor announced that the 21-day quarantine requirement for incoming travellers is to be shortened to two weeks from February 5, given the much shorter incubation period of the Omicron strain.

The Year of the Ox was as strong as its name suggests when it came to sales of second-hand homes.

The number of lived-in homes that changed hands, at 57,272, was the highest of any of the last nine Lunar years, according to Midland Realty, which tracked Land Registry data until January 28.

Those in the price range HK$6 million (US$769,946) to HK$10 million saw the biggest sales growth, increasing 11.5 per cent to 23,858 as of January 25. They benefited from a relaxation in the loan-to-value ratio of mortgages, said Buggle Lau, chief analyst at Midland Realty.

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