Decline in Hong Kong home prices unlikely this year, say experts

Hong Kong’s secondary home prices climbed at their slowest pace in nine months in September but market watchers believe the possibility of a decline is unlikely this year.

The city’s home price index crept up 0.26 per cent to 340, according to data released on Tuesday by the government’s rating and valuation department.

The momentum was slower than the growth of 0.4 per cent in August and 0.3 per cent in July.

Although a relatively modest rise, it was still the 18th straight monthly increase in prices for used flats.

“Home prices will continue to rise but at a slower pace in the coming months,” said David Chan, a director at Ricacorp Properties.

Midland Realty said average overall home prices have risen to HK$11,887 per square foot in October.

“Market sentiment has improved after Chief Executive Carrie Lam Cheng Yuet-ngor did not release further policy to curb home prices,” said Buggle Lau Ka-fai, chief analyst at Midland Realty.

He projects home prices would increase 13 per cent for the whole of this year.

The fresh government data showed home prices had jumped 10 per cent since January this year.

Flats with an area less than 430 sq ft inched up 0.4 per cent in September, the biggest gain among all categories of apartments, according to the data.

“Prices of tiny flats with an area of about 200 sq ft have risen rapidly in the past couple of years,” said Chan.

With the tightening of mortgage lending, he said sales of flats costing HK$6 million to HK$10 million had suffered the most as prospective buyers were required to fork out as much as 40 per cent of the value as down payment.

The cooling measures and sky high home prices have created a frenetic buying fever for tiny flats roughly the size of a parking space – some as small as 128 sq ft – that sell for below HK$4 million. Buyers are able to borrow up to 90 per cent of the flat’s value from the bank.

“An ample pipeline of these mini flats would help keep their prices in check,” he said.

At least 2,100 tiny flats are expected to be completed in the city between now and 2020, as developers try to lure more young homebuyers into getting their first foot on the property ladder in the world’s most expensive housing market.

The new supply of nano flats – as units with a saleable areas below 200 sq ft are known locally – will amount to about 510 units per year up to 2020, up from 151 units a year between 2014 and 2016, according to a report by global property agency JLL.

There are more than seven new projects, involving more than 2,000 units, in the sales pipeline in coming months, according to agents.

Vanke Property (Hong Kong) has applied for pre-sale consent for its residential project in So Kwun Wat, Tuen Mun.

“The project will focus on one and two-bedroom flats,” Quincy Chow, vice president for sales and marketing at Vanke’s operations department said on Tuesday.

Vanke bought the site for HK$3.8 billion, or HK$4,541 per square foot in a government tender in 2015.

He said the group plans to invest a total of up to HK$18 billion in three projects in Hong Kong.