Hong Kong home prices fall to the lowest level since January 2021 as distressed owners slash prices, sell at a loss

Prices fell 0.7 per cent to 381.3 in March, the lowest since 381.9 in January 2021, government index shows
Owners of 264 homes sold their homes at a loss in the first quarter, the highest since the third quarter of 2010, according to Ricacorp

Hong Kong property

Sandy Li

Published: 4:42pm, 27 Apr 2022

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Lived-in home prices in Hong Kong fell for the third straight month in March to a 14-month low as many homeowners sold their units at heavily discounted prices or even at a loss as the city struggled to contain the fifth-wave of the coronavirus pandemic.

Prices fell 0.7 per cent to 381.3 last month, the lowest since 381.9 in January 2021, according to an index published by the Rating and Valuation Department on Wednesday. Home prices eased 3.2 per cent in the first three months of the year, wiping out the 3.19 per cent gain in 2021.

“Homeowners selling at a loss reached a new high in the first quarter,” said Dereck Chan, head of research at Ricacorp Properties. “It reflects the devastating impact of the fifth wave of the coronavirus pandemic on the property market.”

A total of 264 homes changed hands at a loss in the first quarter, the highest since the third quarter of 2010, according to Ricacorp. The average gain per residential transaction, meanwhile, fell for the third consecutive quarter to 66.7 per cent, the lowest in the past 5.5 years.

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Homebuyers are staying on the sidelines in anticipation of an imminent increase in interest rates, while demand is also being affected by the rising unemployment rate and a slump in stock market.

Tough social distancing rules pushed the unemployment rate to 5 per cent in the three months ending in March, the highest in nine months. The city’s benchmark Hang Seng Index fell 6 per cent in the January to March period, which was exacerbated by panic selling following Russia’s invasion of Ukraine.

“Hong Kong home prices will fall 5 per cent in the first half with a brief respite in April,” said Albert Wong, honorary consultant at AA Horses Mortgage Brokerage Services.

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Wong expects home prices to tumble by 20 per cent over the next two years, noting that the Federal Reserve’s aggressive policy tightening timetable could bring to an end an era of cheap money that fuelled Hong Kong property prices over the last two decades.

His sentiment closely mirrors Goldman Sachs’ forecast that Hong Kong home prices would fall 20 per cent between 2022 to 2025 due to a slump in demand caused by an increase in borrowing costs and rising unemployment.

The Fed raised rates by 0.25 percentage points last month, the first increase since December 2018. It suggested it could lift rates six more times to 1.9 per cent this year.

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However, property agents are optimistic, saying home prices have bottomed out.

Ricacorp’s Chan said sales volume and prices would be boosted by the release of pent-up demand in May and June.

Louis Chan Wing-kit, vice-chairman and chief executive for residential at Centaline Property, said he expects activity in the primary residential market to improve from now on as more developers speed up new project launches.

More than 800 flats from four projects in Kowloon and the New Territories will be made available in the coming two weeks. It comes after the government eased Covid-19 curbs helping to reinvigorate the housing market from a three-month lull.

“Home sales will increase as buyers go on a revenge spending spree in the second quarter,” Centaline’s Chan said.