Hong Kong’s home prices declined in July by the fastest pace in five months as a third wave of the coronavirus pandemic in the city curbed buying interest and prompted homeowners to offer deeper discounts. Data for August may disappoint further, analysts said.
Prices for lived-in homes weakened 0.5 per cent from June, according to an index published by the Rating and Valuation Department on Monday, the most since a 1.7 per cent pullback in February. The decline halted a two-month advance in prices.
The third wave in early July “suddenly clouded the market” outlook, said Derek Chan, head of research at Ricacorp Properties. “Buyers became more cautious so owners were willing to offer more discounts and price cuts.”
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Chan expects the decline in August to deepen by 1.5 to 2 per cent as a resurgence in the viral outbreak forced the government to tighten social-distancing measures last month took a toll on consumer sentiment. Limiting social gatherings to no more than two in late July affected property showroom visits and sales turnover, he added.
Knight Frank said the resurgence in the number of Covid-19 cases in Hong Kong in July and August pressured the local residential market. As a result, total transaction volume of residential property fell by 12 per cent on month to 6,133 in July, it said.
“As the Covid-19 situation drastically worsened in July, purchasing sentiment in the luxury market cooled instantly,” said Martin Wong, associate director of research and consultancy in Greater China at Knight Frank. “We saw a significant drop in the number of enquiries and requests for viewing from prospective buyers.”
The public health crisis has dealt a major blow to Hong Kong’s property agencies as profits slumped. Midland Holdings, one of the largest players, lost HK$24.3 million (US$3.1 million) in the first half, compared with a HK$94 million profit a year earlier.
A house measuring 3,034 sq ft at Regalia Bay in Stanley was sold at HK$70 million (US$9.03 million) in late August, below the market price, according to some property agents who declined to be named. The deal resulted in a loss of HK$13.6 million to the owner, or 17 per cent of the home value, including taxes and commission.
In another example, a mainland Chinese owner sold a 1,714 sq ft holiday home at Positano in Discovery Bay for HK$21.5 million in mid-August, incurring a loss of HK$8.21 million.
Wong said sales in the city’s residential market likely remained quiet through August because of social-distancing rules and the lingering impact of an economic slowdown in employment and purchasing power.
However, the prolonged low-interest-rate environment will continue to help shore up optimism over the longer term. Knight Frank expects prices of both mass and luxury residential properties to drop by about 5 per cent this year.
More from South China Morning Post:
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- Hong Kong to record highest deficit in history as top officials argue city must ‘reserve financial strength’ to cope with storms ahead
- Coronavirus, economic slump force mainland Chinese owners to dump their luxury Hong Kong properties at steep losses
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This article Hong Kong’s lived-in home prices decline as third wave of virus outbreak halts recovery first appeared on South China Morning Post