Hong Kong’s home prices narrowly avoided their first annual decline in 12 years as the fourth wave of coronavirus dealt a less savage blow than expected to December’s data.
The price index for lived-in homes in December fell 0.4 per cent to 379.3, stretching a three-month losing streak to 1 per cent, according to data from the Rating and Valuation Department released on Wednesday.
That left the index a fraction above its reading of 379.2 in December 2019. However, it was below the level of 379.7 recorded in January and was the lowest reading since 377.5 in April last year.
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The index has tumbled 4.4 per cent from its record high of 396.9 in May 2019.
Demand had been strong enough to prevent an overall decline in 2020, according to Derek Chan, head of research at Ricacorp Properties.
December’s drop of 0.4 per cent was less than the 1 per cent forecast by the agency.
“This reflected that the market retained its purchasing power [as] everybody was getting used to the pandemic,” said Chan. “Although the fourth wave of coronavirus infections was serious, its impact on the housing market and prices was not as big as expected. Homeowners’ price reductions were not particularly obvious.”
He expects prices to rise by around 0.3 per cent in January because of a mild fall in infections, and about 1 per cent in February because of a seasonal boom in the market.
Other analysts believe the correction in the property market will continue as Hong Kong struggles through the biggest recession in its history, though prices are unlikely to swing wildly from month to month.
Sales of first-hand properties should be strong for at least the first half of this year, said Thomas Lam, executive director at Knight Frank.
In a sign of confidence, developers are set to launch at least 620 flats at four new projects this weekend, making it the biggest weekend property sale since late September when the third coronavirus wave eased.
Wheelock Properties will try to sell 90 units at its Monaco project in Kai Tak on Friday. On Saturday, Nan Fung Development will put 218 apartments on sale at LP10 in Lohas Park while Sino Land will offer 58 flats at Silversands in Ma On Shan.
Meanwhile, China Evergrande will offer 254 flats in phase two of Emerald Bay in Tuen Mun on Sunday.
But the performance of property prices in 2021 will ultimately depend on the local economy and when the border with mainland China can be reopened, said Lam. If that happens in the second half of this year, a large amount of mainland capital will flood the Hong Kong property market, he said.
Lam expects residential rents to bear the brunt of the declining economy and rising unemployment, dropping by over 5 per cent. The official rental index fell 6 per cent in 2020 though it edged up 0.2 per cent in the last two months.
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