Hong Kong’s home prices rise for 28th consecutive month but rate of increase eases further

Hong Kong secondary-market home prices rose for a 28th consecutive month in July, but at the slowest rate since last September, according to data from the Rating and Valuation Department on Friday.

The price index for July rose 0.82 per cent, or 3.2 points, to 393.5, much less than the price gains of 1.853 per cent in June and 1.645 per cent in May. It is the slowest growth since last September’s 0.324 per cent.

Home prices surged 9.8 per cent over the first seven months of the year, according to data from the department.

Hong Kong’s housing estate prices to slump 5 per cent in current quarter

The rental index edged up 0.259 per cent, or 0.5 points, to 193.9, much less than the 0.887 per cent rise in June.

Market observers said they were not surprised by the slower growth in the world’s least affordable housing market.

A record 69 per cent of Hongkongers say home prices will rise

“Perhaps the possibility of future interest rate rises or the threat of a trade war between the US and China could potentially result in some weakness to the local economy,” said Simon Smith, head of research at Savills.

Derek Chan, head of research at Ricacorp Properties, said that coupled with housing policies rolled out by Chief Executive Carrie Lam Cheng Yuet-ngor in late June, home prices may see more limited growth and even drop in the few months ahead.

Pointing to higher mortgage rates, the trade war and Hong Kong housing policies, Chan said “the growth in home price index will further be limited to below 0.5 per cent.

“If the trade war further worsens and rocks confidence about the economy, it is possible that the index will see a mild drop after September. Then this rally in home price, which has lasted the longest ever, will end.”

Drops in homes prices can already be observed in July, with New Territories recording drops in the widest range of homes, according to data from the department.

Large flats of 1076 square feet to 1,721 square feet in the region recorded the biggest drop, plummeting 9.22 per cent to HK$12,251 per square foot.

Small flats below 430 square feet in the region, which are the biggest hopes for young buyers to get on the property ladder, also dropped 2.87 per cent to HK$13,354 per cent. One could buy a small flat of 430 flats there for HK$5.75 million on average.

Such small flats in Kowloon also saw a decrease, though by a smaller extent, of 2.07 per cent to HK$14,529 per square foot. Such flats are up for grabs at HK$6.26 million on average.

Midland Realty predicted a 5 per cent drop in used home prices at major private housing estates, such as Taikoo Shing and Kingswood Villas, in the current quarter ended September this week.

Market sentiment has become less active already as only 20 transactions were recorded at 35 major private housing estates last week, marking a low in two and a half years, according to Midland.

This came after three investment banks, namely Citibank, UBS and CLSA, all predicted citywide home price drops of as much as 15 per cent in 12 months recently.

Separately, investors related to mainland-based developer TFG Holdings planned to convert the shopping mall Kowloon City Plaza, which they bought last year for HK$5 billion, in Sham Shui Po, into a residential project.

According to a document from the Town Planning Board, the proposed 850 flats in two towers and commercial complex can serve as “responding to the needs for housing supply” and “replenish the private housing flat supply in the locality” because of the recent change of three private housing sites in the Kai Tak area to public use, which Chief Executive Carrie Lam Cheng Yuet-ngor announced on June 29 and resulted in a reduction of 5,400 private residential flat provision.