Hong Kong’s beleaguered residential property market will need more tonic from lower financing costs and greater wealth from stock market gains to overcome the losses in income and confidence, industry experts said.
Both are crucial ingredients to foster a sustained recovery in volume and prices through the end of the year, according to Rosanna Tang, executive director and head of research in Hong Kong at property consultancy Cushman & Wakefield.
Further policy easing by the Federal Reserve, as priced in by interest-rate traders, “could bring back buyers’ confidence,” she said. “We could potentially see some improvement of home prices this quarter if the stock market continues to perform well.”
Hong Kong’s live-in home prices fell by 6.2 per cent on average this year through August, according to the latest report published by the Rating and Valuation Department. That is deeper than the 5 per cent drop projected by Cushman for 2024.
Based on recent evidence, the residential market might struggle like it did in the recent past. Confidence among businesses in the city has waned amid a contraction in manufacturing activity. Median household income grew by only 2.1 per cent in the January-to-July period, versus 5.3 per cent in the year-earlier period.
The Hang Seng Index plunged 9.4 per cent in its worst day since 2008, giving investors a reality check after a trillion-dollar stock market rally fanned by China’s surprise policy support on September 24. Some analysts have cautioned against being over-exuberant, given the underlying weak economic conditions.
“The property market is primarily driven by Hong Kong’s overall economic conditions,” said Bruce Pang, head of research for Greater China at JLL. Policy easing is unlikely to trigger a pronounced reversal of the current downward trend, according to the consultancy.
Pang said several rounds of policy relaxations on residential mortgages and stamp duties, while more effective than a quarter-point cut in mortgage financing rates, have yet to bring about a sustainable recovery in confidence among homebuyers.
Investors are banking on the Fed to cut its key interest rate in each of the remaining two meetings this year. This could mean further reductions in interest rates in Hong Kong as the local monetary authority moves in lockstep with the Fed’s decision to preserve the city’s dollar peg.
With only about 2,850 new and second-hand homes sold in September, Cushman said the market has room to perform better as property developers rush out more units to the market to capitalise on improved market sentiment.
The Lands Department has received 31 applications for consent to pre-sell 18,000 flats as of September 30. In the preceding quarter, the government attended to 30 applications from developers involving 13,578 units.
“While the recent stock market rally may generate a positive wealth effect on the property market, we believe that restoring homebuying sentiment and achieving a sustained recovery will take time,” said Norry Lee, senior director of projects, strategy and consultancy in Hong Kong at JLL. “This will largely depend on broader economic revitalisation and the city’s capacity to reignite business growth.”
