Hong Kong’s prices for used residential property declined by the most in six months in August, as the coronavirus pandemic combined with the city’s worst recession on record in sapping investors’ appetite.
The August price index for lived-in homes dropped by 1.1 per cent to 380.6, according to the Rating and Valuation Department on Wednesday, the biggest decline since February and down 4.1 per cent from the May 2019 peak of 396.9. The price index fell 2.1 per cent among large homes measuring over 1,722 square feet (160 square metres), the biggest drop for abodes of all sizes.
The data, a lagging indicator in the secondary market, underscores the uncertainties in one of the world’s most expensive real estate market, as owner-occupiers and investors grapple with the best timing to take the plunge, with 11,994 leftover units unsold, according to Midland Realty’s data. For now, all eyes are on the daily tracking cases of Covid-19 in the city, as the market remains cautious about the possibility of a fourth wave of infections to hit Hong Kong.
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“The fourth quarter very much depends on the change in” local infection numbers, said Derek Chan, head of research at Ricacorp Properties. “If the pandemic eases in the fourth quarter and market sentiment is revived with more new launches that boost the secondary market, home price could increase … by 3 to 5 per cent. But if the pandemic turns for the worse, home price will worsen in the same way.”
The home price index is likely to be stable in September, with an expected increase of up to 0.5 per cent, as local infections ease and social distancing measures are relaxed, Chan said. If the local infections remain stable, the October price index may rise by an estimated 1 per cent. But it will see a further drop if there is a new wave of infections, he said.
Developers will seize the opportunity to launch projects that cater to local demand, clear their inventory of unsold homes and smaller flats, said Thomas Lam, executive director at Knight Frank, adding that he is concerned whether purchasing power can sustain until year-end amid economic downturn and potential layoffs by big companies.
Still, the overall market confidence remains negative amid declining aggregate demand in August, according to the real estate agency Spacious and real estate professional body RICS. A more acute contraction in the price index was observed in Kowloon and Hong Kong Island, their survey says.
Meanwhile, demand from investors continued to contract sharply across Hong Kong Island, Kowloon and the New Territories. Survey participants also reported a tightening of credit conditions for the 14th consecutive month, it said. Credit conditions are expected to continue to deteriorate over the next 12 months. Against this backdrop, respondents noted the fastest deterioration in prices since April.
Amid faltering market sentiment, monthly home sales slipped further by 29 per cent on month to 4,358 in August, according to JLL.
Meanwhile, Hong Kong’s risk of a housing bubble has eased since 2018. The city slipped to fourth place at 1.79 this year behind Munich, Frankfurt and Toronto among 25 major cities around the world tracked by the UBS Global Real Estate Bubble Index released on Wednesday.
Hong Kong’s official home price index has slipped 3.6 per cent from 394.8 during the July 2018 peak through August this year.
More from South China Morning Post:
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