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Hong Kong property

Expect home price deflation of 5 per cent among major Hong Kong housing estates in latest quarterly data, Midland says

PUBLISHED : Thursday, 30 August, 2018, 8:04am
UPDATED : Thursday, 30 August, 2018, 1:52pm

Home prices at major housing estates are on track for a 5 per cent decline in the current quarter, reversing a rising trend that had seen prices increase by double digits in the first half of the year, according to Midland Holdings, the city’s only listed property agency.

Midland chairman Freddie Wong Kin-yip said data for the quarter ended September was likely to reveal a new downtrend in prices amid growing economic and financial headwinds. He made the remarks at a media briefing before the company announced its interim results on Wednesday.

“Hong Kong home prices have risen about 12.2 per cent in the first half of the year,” he said. “Faced with all the headwinds, it will cool down and lose growth momentum after peaking.”

He added that a rush by developers to unload new flats at prices close to those in the secondary market had been a factor in the softening market.

“Developers sped up flat sales and set prices that are closer to used homes, causing a plunge in home prices,” he said.

Wong also noted that veteran investors such as property tycoon Tang Shing-bor have begun selling down their investment portfolios.

He added that local banks would come under pressure to increase their prime lending rate next month. Among other negative factors, Wong cited the decline in the value of the yuan, an unwinding of quantitative easing among central banks, and the growing fallout from the deepening trade dispute between the US and China.

As SHK cuts prices and investors cash out, Hong Kong wonders if housing market is at tipping point

“Mass housing estates such as Taikoo Shing and South Horizons [on Hong Kong Island] as well as City One and Kingswood Villas in the New Territories would see a 5 per cent drop in home price in this quarter ended September,” said Buggle Lau, chief analyst at Midland Realty.

Home prices in the city fell 11.3 per cent between September 2015 and March 2016, reflecting the most recent correction in the real estate market, according to the Rating and Valuation Department.

Lau noted that many housing estates that experienced strong price gains have been under pressure since June.

For instance, prices at Taikoo Shing dropped 5 per cent to HK$20,474 (US$2,608.27) per square foot on average from June to July, after surging 23 per cent in the year to June, according to Midland data.

Growing bearishness towards the property sector has been a recent theme in research by investment banks such as Citibank, UBS and CLSA, which forecast Hong Kong home prices could tumble as much as 15 per cent in the next 12 months.

In spite of the softening market, Midland forecasts total property transactions would reach HK$790 billion in 2018, up 9 per cent year on year and the highest level since 1997.

“Property owners should consider selling some properties when the market is at the peak,” Wong said.

Midland reported first half interim profit rose 30 per cent to HK$150.4 million, the highest since 2011. Turnover totalled HK$2.8 billion for the six months to June.

The company declared an interim dividend of 3.2 HK cents per share.

Hours ahead of Midland’s result announcement, rival real estate services provider Centaline Group, which has business in both Hong Kong and mainland China, reported first half after-tax profit jumped 12 per cent to HK$641 million.

Centaline said its commission income related to the Hong Kong residential market increased to a record HK$2.6 billion in the first half.

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