Hong Kong’s July home prices rise at the slowest pace in 16 months as market loses steam

Hong Kong’s prices of pre-owned homes rose at the slowest clip in 16 months in July, signalling that the breakneck pace of gains is ­finally losing momentum.

The monthly home price index, a measure of movements in the second-hand property market, rose by 0.3 of an index point, or less than one-tenth of a per cent, to 336.8 in July, from 336.5 in June, according to the Rating and Valuation Department’s data. That’s a clear and obvious slowdown from the 0.74 per cent gain in June, and the 1.21 per cent rise in May.

“The growth pace of home prices will slow in the coming months, as it has already risen 10 per cent in the first half,” said Sammy Po, chief executive of Midland Realty’s residential department, who expects developers to offer discounts and other incentives to attract home buyers. Average home prices were HK$11,762 per square foot in August, up 0.1 per cent from July, said Midland Realty.

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Hong Kong’s home prices have risen 24 per cent since April 2016, when the price trend began its 16-month ascent to make the city the world’s most expensive major urban centre to live in. To capitalise on the record prices, developers have accelerated the pace of new projects launches.

“Home prices have soared to a level beyond the general public’s affordability. It will increase the market risk,” said Thomas Lam, senior director at Knight Frank.

The city government has been trying hard to put a lid on prices, and Chief Executive Carrie Lam Cheng Yuet-ngor has identified housing affordability as one of the top priorities of her new administration. Hong Kong’s monetary authority also tightened mortgage rules and lending limits to try to help contain runaway prices.

The prospect of rising interest rates, signalled by the US Federal Reserve – whose monetary policy must be followed in lockstep by Hong Kong to maintain the city’s currency peg to the dollar – may finally be cooling the market.

On Thursday, the Hong Kong Monetary Authority (HKMA) said the number of mortgage applications in July decreased 38 per cent month on month to 9,090. The value of mortgage loans approved in July decreased by 23.5 per cent compared with June to HK$33.7 billion.

“The fall is mainly due to fewer home sales in June. As the market is dominated by sales of new flats, some home buyers may opt for staggered payments which means they will not apply for a home loan until the units are due for delivery,” said Ivy Wong Mei-fung, managing director of Centaline Mortgage.

As many as 98,000 new units are expected to come on the market over the next three to four years, the city’s Transport & Housing Bureau said in July. There are more than 6,400 flats under construction, with 680 set to go on sale this weekend.

ChinaChem is due to release the second phase of 432 units at Parc City, next to the Tsuen Wan West rail station on Saturday, with 13,000 prospective buyers signing up to qualify for the sale. The developer sold all 521 units in the first phase at Parc City last weekend.

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On Sunday, Emperor International Holdings will release 136 units of The Amused, located just north of Kowloon. The project comprises mostly studio units that start from a saleable area of 264 sq ft and a price of HK$4.4 million (US$562,000).