Hong Kong home prices slump to nearly five-year low after biggest monthly decline of year, with more drops to come
- Prices of lived-in homes in Hong Kong fell 2.4 per cent on a monthly basis in October, according to government data released on Monday
- The government’s price index stands just above where it was in November 2017, as analysts say prices will continue their slide into next year
Prices of lived-in homes in Hong Kong had their worst month in an already bad year in October, slumping to a nearly five-year low as worsening global and local economic conditions continued to weaken market sentiment.
A home price index released on Monday by the Rating and Valuation Department fell 2.4 per cent on a monthly basis to 352.4, the lowest level since November 2017 when it was at 347.2. So far this year, the gauge has lost 10.5 per cent.
Should the forecast hold for the rest of the year, the price index for Hong Kong’s secondary property market may fall to its lowest level since May 2017, when it stood at 333.6.
Government officials earlier this month downgraded their forecast for Hong Kong’s economy this year to a 3.2 per cent contraction, worse than the earlier projection of between 0.5 per cent growth and 0.5 per cent contraction.
Hong Kong’s five biggest lenders, including the three note-issuing banks HSBC, Standard Chartered and Bank of China (Hong Kong), raised their key rates at the start of November to the highest levels in 14 years, following US rate increases to curb inflation in the world’s largest economy.
Prices of flats measuring at least 752 square feet slipped 2.5 per cent, while prices of smaller units retreated by 1 per cent.
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The bank, the first to make a clear-cut forecast, said property prices will fall another 10 per cent from October to the second quarter of 2023.
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“The 2.4 per cent decline is the largest month on month drop since November 2018,” said Nelson Wong, executive director of research at JLL in Hong Kong. “This is a clear reflection of the effect of higher mortgage rates, subdued market sentiment and the broader weaknesses in the financial market during the month.”
“With interest rates likely to stay elevated and the economy continuing to be mired in a recession, the declining trend is likely to stretch well into 2023. It is therefore high time the government began to re-visit the suitability of all the counter-cyclical demand-side measures, allowing property transactions to be conducted on normal terms.”
Meanwhile, home rents rose by about 0.3 per cent in October after remaining unchanged in September. For the year, rents have declined by 1.75 per cent.