Hong Kong home prices rose 2.78 per cent in September in sign of accelerating market recovery

Hong Kong home prices rose 2.78 per cent in September from August, their highest month-to-month growth rate since the market recovery began in earnest in April.

The Rating and Valuation Department’s monthly price index for private homes was at 295.5 in September, the sixth consecutive monthly increase, bringing the cumulative rise to 8.88 per cent.

September’s gain compared with 1.91 per cent growth in August and July’s 1.9 per cent growth, as local buyers regained confidence in the market and more capital flowed into the Hong Kong residential market as the yuan continued to devalue and mainland authorities introduced domestic buying curbs.

Home prices are now 3.46 per cent below their peak in September last year, according to government data. Meanwhile, the rental index in September rose 0.84 per cent month on month .

With prices rising, the incidence of negative equity – when the market value of a property falls below the outstanding mortgage secured on it – is falling sharply.

The Hong Kong Monetary Authority (HKMA) said the number of negative equity cases fell 94.7 per cent to 69 cases at the end of September 2016, compared with 1,307 cases at the end of June of this year.

The total value of residential mortgage loans in negative equity decreased to HK$282 million by the end of September compared with HK$4.45 billion as of end June, according to the HKMA’s latest survey results released on Monday.

Hong Kong’s record in negative equity cases stands at 105,697, set at the height of the Severe Acute Respiratory Syndrome (Sars) epidemic in 2003.

Property consultants expect home prices will surpass their previous peak in the next couple of months.

“Home prices will continue to go up as demand remains strong amid robust sales activity in the primary sales market,” said Cliff Tse, regional director of valuation advisory services at international property consultant JLL.

Tse expects buying activity will slow down in the fourth quarter when home prices hit their new record high.

Thomas Lam, head of valuation and consultancy at Knight Frank, said strong residential demand and competitive developer sales packages are expected to further stimulate the market in short term.

Investor sentiment was also boosted by the anticipation that more mainland capital would be flowing into the city, especially in the luxury sector, said Lam.

In the face of abundant housing supply and a potential US interest-rate increase, Lam expects the housing sector will soften in the next two years even though he doesn’t see a sharp price correction.

The Transport and Housing Bureau on Friday said the potential supply of new flats in Hong Kong is expected to hit 93,000 over the next three to four years, and there were 19,100 units under construction in the first nine months of this year.