Hong Kong home prices extend rout in October as protests escalated and economy mired in recession

Lam Ka-sing

Home prices in Hong Kong fell for a fifth month in October after an escalation in anti-government protests kept investors at bay despite efforts by the government to shore up the market, an official report shows.

Prices of homes in the secondary market fell by 1.3 per cent on average, according to an index compiled by the Rating and Valuation Department. The slide brings the rout since the end of May to 5.2 per cent, reflecting the turmoil in the city’s ranked as the world’s least affordable housing market.

Other industry reports this month showed the biggest drop in office rents in a decade and a slump in commercial land value at state auction, among others.

The political fallout and a prolonged US-China trade war have dented sentiment in the marketplace, with the economy slipping into a technical recession last quarter and the stock market suffering its worst dubbing in four years. Since then, fighting between hard core protesters and police have descended into chaos and violence at university campuses.

“The social movement still persisted during that time, so home prices have kept falling,” said Derek Chan, head of research at Ricacorp Properties. “We expect the reading after November to improve following the relaxation in mortgage requirements.”

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The pace of decline in home prices has eased, though, when compared with a 1.7 per cent drop in September which was also the biggest monthly pullback in 2019. Chief executive Carrie Lam Cheng Yuet-ngor announced measures to boost home ownership in mid-October by easing rules on mortgage financing.

Some market observers are worried that there could be more anti-government protests in the coming weeks, amid signs pro-democracy parties that swept 17 of the 18 districts in the November 24 elections will step up their demands on the government. The number of people selling flats to acquire foreign citizenship has continued to rise, they said.

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The outlook for the rest of the year remains depressing, according to Thomas Lam, an executive director at Knight Frank, who predicts another 2.5 per cent drop into the year end. While there is some excitement in the mid-range segment, the upper end of the home market is hurting. “The unrest has affected turnover of luxury homes,” said Lam. “The local economy is a worry, it has affected the people’s purchasing power.”

Lam expects homes priced in the HK$6 million to HK$10 million bracket will enjoy some support in the next three months, with volume rising by 20 to 30 per cent.

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Sun Hung Kai Properties, the city’s biggest developer by market value, expects a 10 per cent drop in total transactions in the housing market this year.

“Hong Kong’s housing market has undoubtedly been affected by the US-China trade war and social movement, so the marketing of our housing projects has been delayed,” Victor Lui, deputy managing director, said in an interview before today’s data.

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