Hong Kong home prices slip from all-time high amid concerns about stock market wealth, policy speculation

home prices, regulatory crackdown, China Evergrande’s debt crisis.

Hong Kong’s lived-in home prices retreated for the first time this year in August from an all-time high, after a slump in the local equity market weakened buying sentiment.

Prices declined 0.15 per cent to 397.1 last month, according to an index published by the Rating and Valuation Department. The department revised the reading for July to 397.7 from previously reported 396.3. The previous record of 396.9 was set in May 2019.

The city’s benchmark equity index has declined every month this quarter, including a 10 per cent rout in July because of concerns about regulatory crackdown on private businesses and China Evergrande’s debt crisis. The slump has erased US$615 billion in market value from 60 companies in the benchmark Hang Seng Index.

“Homebuyers are getting more cautious as the [index] is close to the historical peak,” said Martin Wong, head of research and consultancy in Greater China at Knight Frank. “The low-interest rate environment will continue to support [the market].”

The drop in August could also be due to the wobble in the stock market since the middle of the year, according to Derek Chan, head of research at Ricacorp Properties. Prices are likely to continue to see-saw around current levels, he added.

Property buyers have remained apprehensive lately as stock prices wavered, hurting the wealth effect. Another reason for the caution is speculation about property market conditions before the annual policy address on October 6, Chan said.

“Everyone wants to wait and see what other new measures the Policy Address will have about the housing market and land supply,” he added, given recent rumblings by mainland officials about the state of the housing crisis in the city.

Still, he is optimistic about the trend in the final quarter, predicting a potential 2 to 3 per cent gain in total as uncertainty surrounding Policy Address clears up.

“We believe the government will not impose further restriction on the Hong Kong housing market in the short term, but they will focus on building more affordable housing,” Wong at Knight Frank said.

New housing projects in October are expected to enjoy brisk sales, giving the secondary market and home rentals a shot in the arm, said Louis Chan, Asia-Pacific vice-chairman and chief executive of the residential division at Centaline Property Agency.

Rentals have rallied for a sixth month in August for a cumulative gain of 3.2 per cent to 182.2, according to a rental index released by the Rating and Valuation Department.

“The pandemic situation in Hong Kong is stable, the unemployment rate continues to fall, and the economy is slowly recovering,” said Chan of Centaline. “Rising rents are another indicator of economic improvement. Coupled with the peak summer rental season in August, rents have high chances to rise.”

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