Hong Kong’s lived-in home prices were within touching distance of pre-protest days and could set a record over the next two months.
In a reflection of the upwards trajectory in the city’s housing market and economy, the prices of lived-in homes extended a four-month rally in April and were at their highest since July 2019, according to Rating and Valuation Department data released on Thursday. They were also within about 1.5 per cent of a historic high recorded in May 2019, before the anti-government protests kicked off.
“If the increase in May amounts to over 1.5 per cent … [the lived-in home price index] actually can already break the record,” said Derek Chan, head of research at Ricacorp Properties. He added that June’s increase would definitely break the record, “if the momentum is sustained and unchanged”.
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Chan was optimistic because Hong Kong has been able to control its coronavirus outbreak, its economy is recovering gradually, its gross domestic product growth has found momentum and unemployment has fallen for two straight months. The response to new projects this month has also been satisfactory.
The price index of lived-in homes edged up 0.4 per cent to 390.8 in April from 389.1 in March, and was about 1.5 per cent shy of the 396.9 recorded in May 2019. Chan said he expected the increase this month to amount to 1.5 or 1.6 per cent, which meant the index would almost break the record. And if the index rose by about 1 per cent in June, it would climb to the unprecedented 400-point mark.
Chan’s comments echoed an earlier forecast by Centaline Property Agency, which has said home prices could break records mid this year. “The housing market entered a bull market in the second quarter – home prices may break records next month,” said Louis Chan, Asia-Pacific vice-chairman and chief executive of the residential division at Centaline. The agency expects home prices to rise 15 per cent this year.
In the primary market, the response to new launches had been satisfactory, as indicated by the success of South Land, which has been developed by Road King Infrastructure atop the Wong Chuk Hang MTR Station.
“The Wong Chuk Hang project [South Land] has sold out for two straight rounds, driving secondary market [turnover] to a relatively high level,” Chan said. “So some homeowners find that the overall housing market sentiment is improving. Asking prices have become relatively aggressive and firm. This should drive home prices upwards, with the increase widening again.”
The biggest growth in prices, at 0.8 per cent, was reported for homes measuring between 1,076 sq ft and 1721 sq ft, reflecting a rising demand for larger homes.
The transaction volume of the secondary market rose 6.2 per cent month on month to 6,258 deals in April, the highest in the past 102 months, according to the Land Registry.
Chan, however, did not think the government would impose extra cooling measures because housing prices were increasing gradually, instead of rising sharply. It might intervene if the increase became uncontrollable or very obvious. “What’s more, the market is still overshadowed by the pandemic, which has not fully dissipated,” he added.
The overall rental index also extended a two-month rally, surging 1.9 per cent – its biggest increase since June 2012 – in April to 177.7, its highest level since November 2020, according to the Rating and Valuation Department data. It was, however, still 11.2 per cent below its historic peak, 200.1 points recorded in August 2019.
Rents were expected to rise gradually, at around 0.5 per cent per month, in the next two months, Ricacorp’s Derek Chan said.
“Hong Kong’s pandemic has in recent months been controlled properly, with prospects for border reopening and economic recovery [improving]. So the rental market has recovered gradually,” said Centaline’s Louis Chan. “Hong Kong’s economy is gradually picking up. Demand in the leasing market will gradually increase, which can drive rents upwards and support property prices at the same time.”
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