Warning bell has rung: home prices dropped at much faster rate last month

The warning bell has rung in Hong Kong as prices of used homes in September dropped at a much faster speed than in the previous month, continuing a slide that is sparking worry through the property market, from agencies to homeowners to developers.

The price index of used homes dropped 1.44 per cent in September, to 388.8 from 394.5, a bigger drop than the 0.08 per cent recorded in August, according to data released by the government’s Rating and Valuation Department on Wednesday. August marked the first decline in used home prices after a 28-month rally.

Prices are being weighed down by the deepening US-China trade war, downbeat stock market and rising interest rates, said Derek Chan, head of research at Ricacorp Properties.

In addition, supply has increased as a result of the coming vacancy tax on empty flats and launches of new developments. During the three-day Mid-Autumn Festival in September, almost 900 flats went up for sale – the most at one time in the past five years. Meanwhile, developers have been releasing into the market long-held luxury flats never lived in so they don’t get hit with the severe vacancy penalty.

Not only are used home prices falling. Developers have been dropping prices of new flats and offering other deals to try to stimulate buying.