March 30, 2023
HONG KONG – Hong Kong’s residential-property market has posted gains for two consecutive months, pushing prices to a four-month high.
The price index of private domestic units tracked by the Rating and Valuation Department stood at 345.9 in February, showing a month-on-month increase of 2.2 percent — higher than January’s 1.1-percent gain. February’s figure represented a yearly decline of 9.8 percent.
Compared with the index’s historic high of 398.1 recorded in September 2021, the cumulative decline in property prices had narrowed to 13.1 percent.
S&P Global Ratings sees home prices in the special administrative region reviving slowly this year with the city having lifted all its COVID-19 restrictions and the full resumption of normal travel with the Chinese mainland. This could boost homebuyers’ confidence amid an improved economic outlook.
“We expect Hong Kong’s residential property prices to rebound by 5 percent to 8 percent in 2023, following a 16-percent correction in 2022,” said S&P Global Ratings credit analyst Edward Chan.
S&P Global Ratings sees home prices in the special administrative region reviving slowly this year with the city having lifted all its COVID-19 restrictions and the full resumption of normal travel with the Chinese mainland. This could boost homebuyers’ confidence amid an improved economic outlook
“Backed by solid pent-up demand, the primary residential-property transaction volume is likely to rise to between 15,000 and 17,000 units this year – from 10,315 units in 2022,” he said.
Chan said if homebuyers’ demand is weaker than expected due to deteriorating affordability caused by rising interest rates, developers may cut prices further to boost sales.
Global real-estate advisory firm Jones Lang LaSalle expects sentiment in the residential-property market to recover with the resumption of normal travel with the mainland, but an increase in transactions may be more gradual.
Norry Lee, senior director of projects strategy and consultancy at JLL in Hong Kong, said, however, she expects the positive market sentiment arising from the widening of the value band, enabling first-time homebuyers to pay lower rates in the ad valorem stamp duty, to be short-lived.
JLL data show that 3,051 residential transactions were recorded in January this year — 18.7 percent lower than the previous year’s monthly average of 3,755 transactions. Purchasing activities by non-local buyers were also tepid. Only 34 transactions involving buyers’ stamp duty were recorded in January, compared to a monthly average of 53 in 2022.
“The rising home prices since the beginning of this year may not last. Once the pent-up demand is digested, turnover is likely to decline again. We expect buyers to remain lukewarm and adopt a wait-and-see attitude until there is a visible pick-up in the local economy. Investors will continue to be sidelined until punitive stamp duties are removed,” said Nelson Wong, executive director of Research at JLL in Hong Kong
According to JLL data, the SAR’s median income growth last year was significantly less than the rise in mortgage interest liability. The estimated monthly interest payment for a HK$5-million ($640,000) mortgage loan surged by about HK$5,500 last year, while the median monthly household income increased by merely HK$800.
Colliers Hong Kong expects mass residential-property prices to grow by more than 8 percent this year, compared with 2022.
Kathy Lee, head of research at Colliers Hong Kong, warned that the external economic environment would drag down home prices. “Continued geopolitical tensions affecting the mainland’s export trade and, subsequently, Hong Kong’s import-and-export market performance, along with weakened investor confidence in financial markets due to the US bank crisis, will potentially slow down Hong Kong’s economic recovery,” she said.
“We are also cautious about the outcome of this year’s land sales. If more tenders fail or transactions are made at lower-than-expected bidding prices, property prices will continue to face downward pressure,” Lee added.