Hong Kong’s June lived-in home prices drop while rents rise as buyers await mortgage cuts

The prices of Hong Kong’s lived-in homes fell to the lowest in eight years while rental charges rose amid record mortgage rates, as the buying momentum ran out after February’s removal of a stamp duty.

The home price index dropped by 1.2 per cent to 301.8 in June from a month earlier, the lowest level since the 304.3 reported by the Rating and Valuation Department in October 2016. That brought the decline of second-hand homes to 3.1 per cent in the first six months of the year.

Prices fell across all apartment categories and sizes. The biggest deteriorations were reported in small and medium-sized apartments, which fell by 1.3 per cent to 303 in June, down by 3.1 per cent in the first six months. The prices of large second-hand apartments, defined as those exceeding 100 square metres (1,076 square feet) in size, dipped by 0.5 per cent in June to 277.5

“There is no good news at the moment” to attract buyers into the housing market, said Knight Frank’s Greater China head of research Martin Wong, who noted that the momentum from the government’s scrapping of demand curbs in February had “been digested by the market”.

“Factors such as high interest rates and the hoarding of leftover units from new residential development continued to drag down property prices,” he said. “Transaction volume increased significantly after the removal of cooling measures, but second-hand property prices will continue to weaken in the short term due to the impact of first-hand sales.”

There may be hope on the horizon, as economists and strategists expect the US Federal Reserve to start cutting its benchmark rate in September, which would compel Hong Kong’s monetary authority to follow suit. Whether Hong Kong’s commercial banks match the cut in base rates with similar cuts in their mortgage would determine the housing market’s direction, analysts said.