Economic slowdown, high borrowing costs and a new supply of properties have continued to weigh on Hong Kong’s housing market, with the prices of secondhand homes dropping to a nearly eight-year low in July, and with rents having risen for five consecutive months as potential buyers turn to the rental market.
The index of lived-in homes in Hong Kong declined by 1.9 percent on a monthly basis to 296.8 in July, marking its lowest level since October 2016, according to statistics released by the Rating and Valuation Department on Wednesday.
The drop had widened from June’s 1.01 percent and was the third consecutive month of decline. In total, home prices have fallen by 4.7 percent this year.
Derek Chan, head of research at Ricacorp Properties, expects property prices to continue to face pressure, with the decline in the third quarter likely to widen, and to stabilize in the fourth quarter at the earliest following the expected United States interest rate cuts.
ALSO READ: HK home market: Limited downside risk, rate uncertainty and economic downturn linger
“The widening of the price decline in lived-in homes in July was mainly due to the low prices of new apartments launched for sale, which directly dragged down secondary home prices,” he said.
He forecasts that secondhand home prices will drop further by 1 percent in August and 0.5 percent in September, leading to a 3.4 percent fall in the third quarter.
Martin Wong, head of research and consultancy for Greater China at property consultancy Knight Frank, said the market has already digested the positive news concerning the scrapping of property cooling measures announced in February, and there has been no other good news since then. Meanwhile, factors like high interest rates and the hoarding of unsold new apartments are drags on home prices.
Hong Kong’s property industry experienced a short-lived jump in the two months after the city removed all stamp duties in a move to shore up its housing market. The price index of lived-in homes ended its 10-month consecutive decline, rising 1 percent on a monthly basis in March and 0.29 percent in April before reversing back onto a downward trajectory.
ALSO READ: HK real estate market feels rising rates, hopes for relief
“With anticipated interest rate cuts in the US, it is expected that property prices may reach the bottom in the third quarter and hover close to the bottom in the fourth quarter,” Wong said.
“We expect that overall decline in the second half will be slightly narrower than in the first half and we maintain our previous forecast of a 5 percent drop in property prices for the whole year.”
Meanwhile, the index of rents rose 1.1 percent in July compared with the previous month, marking the fifth consecutive month of increases.
Wong said the Top Talent Pass Scheme and other talent recruitment programs launched by the Hong Kong Special Administrative Region government have led to an increase in the number of professionals in the city, creating more rental demand for residential properties.
READ MORE: HK's love affair with real estate endures even in tough times
He predicts that Hong Kong’s rental prices will continue to rise by 5 to 8 percent this year.
As of the end of June, nearly 200,000 applications had been approved through various talent attraction programs in Hong Kong, of which more than 130,000 people had arrived in the city, according to official statistics.
