Citibank survey shows Hongkongers less optimistic about home price rises, points to downward adjustment

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Hong Kong home prices might see a downward adjustment after peaking in August, as fewer Hongkongers remained optimistic about price rises in the coming year, according to a Citibank survey.

The number of people who expected property prices to rise further had fallen to 38 per cent in the third quarter from 54 per cent in the previous three-month period, according to the Citi Residential Property Ownership Survey released on Thursday. The figure was, however, still higher than previous year’s result of 23 per cent in the same period.

“For the overall housing market, we expect home prices to have peaked in 2021 August, and [it] is potentially subject to a 7 to 10 per cent downside until 2022 June,” said Josephine Lee, head of retail banking at Citi Hong Kong, adding that factors such as front-loaded future demand, stock market corrections that affect home buying sentiment and policy risk concerns were to blame.

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The ownership survey has been running since 2010 based a random sample of more than 500 Hong Kong respondents collected by the University of Hong Kong Social Sciences Research Centre in September.

The drop in the third quarter was due to prospective homeowners entering the market earlier in the first half of 2021, Lee said. Buyers were being optimistic about an economic recovery in Hong Kong, as well as a relative easing in the city’s Covid-19 outbreak, she added.

“This leads to the housing market being more quiet for the next 12 months. So in this quarter, it is reasonable for less respondents to expect the property price to rise ,” she said.

Hong Kong property mania inflates prices, putting affordability beyond reach for most first-time buyers

The Hong Kong property market remained supported by positive structural factors, including a shortage of housing supply and long-term economic growth upon the reopening of the border with mainland China, Lee added.

“Looking at the overall drop [ in property prices], this a very minor adjustment,” Martin Wong, head of research and consultancy in Greater China at property consultancy Knight Frank, said on the other hand. Housing prices had, in fact, peaked during July according to government data, he added, and August and September had seen a combined fall of about 0.5 per cent.

Previous peaks in Hong Kong’s housing prices in 2018 and 2019 were followed by adjustment periods of six to nine months, where they coincided with different events, he added.

Prices of mid-sized Hong Kong flats driven by first-time buyers taking advantage of relaxed mortgage rules

“In 2018, there was the trade war between the United States and China. In 2019, there was the social unrest [in Hong Kong],” Wong said. “In this year’s adjustment period, we don’t see the emergence of any similar unfavourable conditions, so the adjustment period will be relatively shorter.”

If the reopening of the border with China proceeds as planned, and no other unfavourable conditions appear, housing prices will rise by 5 per cent next year, Wong said.

Elsewhere, the city’s overall property transactions, including those of residential, commercial and industrial properties, as well as parking spaces, fell to a nine-month low of 6,250 in October, according to the latest Land Registry data. Transactions were down 15.5 per cent month on month compared with the 7,400 deals recorded in September. A total of 6,212 deals were concluded in January this year.

Hong Kong’s lived-in home prices, meanwhile, fell by 0.4 per cent to 396.3 in September, according to a government index published last month. It was their steepest fall since October 2020, when it retreated by 0.5 per cent, according to Knight Frank.

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