Hong Kong home prices ‘likely back in a downtrend’ as slump resumes after ‘short-lived’ first-quarter recovery: Citi
- Since the last week of March, the city has recorded fewer than 80 transactions per week, and in one case only 35, according to Midland Realty
- As low volumes pressure owners, with some of them selling at a loss, Citi now expects overall prices to stay flat through 2023
A first-quarter rally in Hong Kong’s home market turned out to be remarkably “short-lived”, as sales have now slumped and sellers are slashing prices to get deals done amid a “downward trend” that will last through the year, according to property agents and analysts.
“Hong Kong residential transaction volumes have been weakening since March 23, which was quite a surprise to us how short-lived this round of recovery was,” he said.
Hong Kong home prices “are likely back in a downtrend” given that weekly transaction volume in the secondary market has been low for two consecutive months, he said.
On Tuesday, one owner lost 5.4 per cent after selling a two-bedroom apartment at Mountain Shore in Ma On Shan for HK$7 million after five years of ownership.
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A day before, another owner slashed the price for a three-bedroom home at Dragons Range in Kau To Shan, owned for eight years, by 16.8 per cent to HK$13.3 million.
The second-hand home market has been “inactive recently,” said Parco Chan, manager at Centaline’s Ma On Shan branch. Most of the deals that closed did so only after sellers dropped prices, he added.
Non-local buyers and local investors have not yet returned to the market despite China’s reopening, said Citi’s Yeung.
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In April, transactions by non-local buyers accounted for only 1.5 per cent of home sales in Hong Kong, according to data from the Inland Revenue Department. The percentage has stayed below 2 per cent before and after China’s reopening – far from the average 5.2 per cent seen between 2018 and the first half of 2019.
Local investors are also buying fewer second homes. In April, they accounted for only 2.7 per cent of the transactions, versus 6.1 per cent between 2018 and the first half of 2019.
Looking ahead, Citi expects “overall home prices to stay flat in 2023, indicating around a 7 per cent home price drop during the second and fourth quarter”, Yeung said.
When weekly secondary volume falls below 80 deals, home prices have historically been unable to rebound over the short term, he said. Given the data since late March, he believes the market is at the beginning of a correction period.
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“We expect this round of correction to last until the end of 2023,” he said, adding that home prices may rebound again when the US starts to cut interest rates in the first half of 2024 and a high season begins around the Lunar New Year period.
This month, real estate consultancy JLL also predicted that the home price rally in Hong Kong would lose steam in the near term.
Interest-rate increases are “affecting the buying interests of local and mainland buyers”, said Norry Lee, the firm’s senior director of projects strategy and consultancy department.
That said, Hong Kong’s investment-immigration scheme and tax incentives, coupled with Singapore’s hefty increase in stamp duty for additional buyers, “will lend support to housing demand in the future”, said Cathie Chung, JLL’s senior director of research.
