Hongkongers less bearish on property market, as decline in home prices begins to excite buyers: Citi survey

Hongkongers are turning less bearish about the city’s residential market after two major calamities in the past year made prices cheap enough to excite some buyers, according to a survey by Citigroup. On balance, the conclusion was it might be better to wait a little longer.

About 10 per cent of respondents considered the market conditions an excellent time to purchase a home, the US bank said on Monday. That is the highest level in nine years, and double the level recorded in a similar survey in January.

While negative sentiment prevailed, fewer people were sitting in the bearish camp, as home prices took a beating. Only 52 per cent of them said it was a terrible time to buy a home in March, versus 65 per cent in January.

“Most people would think that the virus will be gone soon, so this is pent-up demand released into the market” over the last 10 months, said Alva To, vice-president and head of consulting in Greater China at Cushman & Wakefield. The market is likely to remain volatile in the second half of this year, he added.

The coronavirus outbreak has dealt a giant blow to the city, worsening a recession, rocking several pillars of the economy and the HK$326 billion market for new homes. The city’s gross domestic product shrank by a record 8.9 per cent last quarter and the unemployment rate approached a 10-year high.

While finance chief Paul Chan Mo-po has cautioned about more pain in store, it is not necessarily bad news for house-hunters with spare cash to pick up a bargain or two in a market infamous for being out of reach for the general population.

Home prices have retreated 7.6 per cent on average from a peak in June last year, following the city’s anti-government protests, according to the Centa-City Leading Index. It has exceeded the 7.5 per cent median drop expected by respondents in the survey, and compared with the average 10 per cent drop in prices during the severe acute respiratory syndrome outbreak in 2003.

Even so, more people – 57 per cent in March versus 41 per cent in January – expected prices to weaken further this year, according to the survey. Besides, 24 per cent of the respondents predicted their household finances would weaken, twice the ratio in January.

“The market will highly depend on the unemployment rate, which is likely to be increasing significantly and GDP growth will be very negative,” said Cushman & Wakefield’s To.

Citibank commissioned the University of Hong Kong Social Sciences Research Centre to conduct the survey. It interviewed a random sample of over 500 Hong Kong respondents by phone in January and March respectively. The bank started the quarterly market survey in 2010.