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Potential homebuyers queue up for 228 flats on offer at the Mayfair By The Sea 8 from Sino Land on January 23, 2019. Photo: SCMP Handout

JP Morgan goes bullish on Hong Kong home prices, expecting gains of up to 7 per cent this year

  • Buoyant liquidity conditions, improving sentiment, to underpin gains in residential prices from April, says JP Morgan researcher
  • Sino Land’s Mayfair by the Sea 8 in Tai Po garners lacklustre response on Tuesday, as only 31 of 118 flats are sold as of 6pm

JP Morgan has joined CLSA and Citibank in saying home prices in Hong Kong will rise from April to December under improved sentiment and continuous high liquidity, though analysts continue to caution the commercial market is likely to remain soft.

Home prices were likely to rise 5 to 7 per cent after a short-lived price correction of 15 per cent, said JP Morgan’s managing director and head of Asia property and Hong Kong research Cusson Leung during a media briefing on Tuesday.

Leung’s updated market view came after CLSA and Citibank, among other analysts, last week said home prices were likely to ­stabilise in March and rise by up to 15 per cent by the end of the year.

“In November, the Federal Reserve said the rise in interest rates would start to slow down in pace,” Leung said. “In December, a developer sold about 1,500 flats at a Kwun Tong project with 2,000 flats on offer. The sentiment was changing very rapidly.”

He added that the project drew a strong response from prospective buyers in terms of registration after the developer cut prices by 10 to 20 per cent, reflecting the underlying demand for property bargains.

“The rebound in turnover would drive sentiment, triggering a rebound in home prices,” Leung said.

Leung added that prices remain highly correlated with liquidity in the banking system, even as concerns about a cyclical downturn in the economy have become more prominent.

Hong Kong’s bank deposits stood at HK$4.99 trillion (US$640 billion) as of November 2018, according to the Hong Kong Monetary Authority.

“The money has never left,” Leung said.

He cautioned that liquidity conditions could tighten if mainland companies were to ramp up their borrowing in Hong Kong in an effort to offset the domestic credit tightening.

However, the upbeat outlooks by the major investment banks contrasted with a lacklustre sales result.

A rendering of the clubhouse of Mayfair By the Sea 8. Photo: Handout

A launch of 118 flats at Sino Land’s Mayfair by the Sea 8 in Tai Po on Tuesday resulted in 31 sales as of 6pm, or 26 per cent of the offered stock.

Prices range from HK$6.13 million (US$781,283) to HK$16.06 million, or HK$12,289 to HK$20,872 per sq ft after discounts.

Sammy Po, chief executive of the residential division at Midland Realty, attributed the poor reception to the relatively weak interest among first-time buyers for more expensive three-bedroom flats.

“The 24 two-bedroom flats were all sold out,” Po said. “The rest are three-bedrooms.”

The outdoor amenities at Sino Land’s Mayfair by the Sea 8 in Tai Po. Photo: Handout

In contrast, all 66 flats at Sun Hung Kai Properties’ Downtown 38 were snapped on Saturday, all of which were single bedroom or two-bedrooms layouts.

Meanwhile sentiment in commercial property is down as analysts see continuing weak conditions.

In particular, office rents in core districts will drop by as much as 5 per cent this year, while those in non-core districts will grow by up to 5 per cent as the decentralisation trend continues, said Alan Lok, executive director of advisory and transaction services of office at CBRE.

Rents in core high street areas and shopping malls will remain flat this year amid declines in consumer spending and economic uncertainty, according to CBRE.