Hong Kong secondary market home prices surge after US rates stay unchanged

Hong Kong’s secondary residential prices have seen a sharp rebound as buyers have jumped back into the market after the United States decided to keep interest rate unchanged and the overall improvement in the stock market has increased buying power.

Housing estates including Taikoo Shing in Quarry Bay and Kingswood Villas in Tin Shui Wai have registered noticeable increases in prices after collapsing as much as 20 per cent since September last year.

But industry experts said the housing market has not yet found its floor considering the upcoming abundant supply of new flats could limit price growth.

“In contrast to the rising supply of new flats, there are fewer units available for sale in the secondary market. Some owners have held back from selling after seeing market sentiment improve,” said Herman Po, chief sales manager of a Taikoo Shing branch of Hong Kong Property Services (Agency).

He said the agency just sold a 1,277 sq ft duplex unit with a 900 sq ft rooftop flat at Juniper Mansion in Taikoo Shing for HK$28 million, or HK$21,926 per square foot.

“It is the second highest transaction in the housing estate. Duplex units are rare products in Taikoo Shing,” he said.

The entry level price for two bedroom flats has increased to HK$6.8 million, from HK$6 million in March, while three-bedroom flats cost nearly HK$8 million, up from HK$7 million, he said.

Hong Kong home prices stopped declining in March after falling 11.3 per cent from September last year, according to data released by Rating and Valuation Department.

The department’s latest monthly supplement showed the general price index for private homes rose 1.6 per cent for the three months to June, compared to a decline of 2.7 per cent in the first quarter.

Perry Fong, sales director at Centaline’s Tuen Mun, Yuen Long and Tin Shui Wai branches, said some individual units at Kingswood Villa, which is mainly the focus of first-time buyers, sold for high prices but they were exceptional cases.

“Sentiment did improve but overall prices only edged up slightly,” he said.

On Sunday, a 441 sq ft unit changed hands for HK$3.6 million, or HK$8,186 per square foot. The price tag represents an increase of HK$1 million within 10 months after another unit of the same size in the same block sold for just HK$2.6 million in October last year.

But Fong said the market has still not fully recovered as there is a large supply of new flats due to come on the market over the next several years.

On Friday, government estimates revealed the potential supply of new flats was expected to hit 93,000 over the next three to four years, the highest level since September 2004.

The latest supply estimate from the Transport and Housing Bureau is the equivalent of an average of 23,000 new flats per year.

“Most investors remain cautious on Hong Kong residential over the mid to long term despite price and volume being likely to benefit from the change of interest rate expectations in the near term,” wrote Susanna Leung, a property analyst at Credit Suisse.

“They are concerned about slowing growth, demographic structure and the unfavourable political environment in Hong Kong. Even for those investors who are more constructive, they see little upside in home prices despite downside also looking limited,” she said

Prospective buyers like Kat Lou, who lives in Wan Chai, have a different take. She plans to spend her handsome gains from the stock market to buy a second unit for investment. Her budget is not more than HK$5 million.

“The outcome of the Brexit could indirectly propel asset prices globally as the US has deferred the interest rate hike. Britain may even need to cut interest rates and introduce stimulus measures to ease the monetary system,” she said.

“Home prices in Shenzhen have peaked after rising almost 50 per cent so why not invest in the Hong Kong property market where prices have fallen 10 per cent. The chances of betting on the wrong side are slim for Hong Kong property at this moment,” she said.