Home prices hit nearly 5-year low as woes deepen

Index falls by 2.4 per cent as worsening economic prospects continue to weaken market sentiment

Prices of lived-in homes in Hong Kong had their worst month in an already bad year in October, slumping to nearly a five-year low as worsening global and local economic conditions continued to weaken market sentiment.

A home price index released yesterday by the Rating and Valuation Department fell by 2.4 per cent on a monthly basis to 352.4, the lowest level since November 2017 when it was at 347.2. So far this year, the gauge has lost 10.5 per cent.

“It’s the biggest decline this year on a monthly basis, and a similar price drop is expected in the coming two to three months,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank.

“The weak sentiment is caused by the quickly deteriorating local and global economic prospects.”

The latest interest rate increase early this month contributed to the decline although its impact had already been expected by the market, Wong added.

Should the forecast hold for the rest of the year, the price index for the city’s secondary property market might fall to its lowest level since May 2017 when it stood at 333.6.

Government officials this month downgraded their forecast for Hong Kong’s economy this year to a 3.2 per cent contraction, worse than their earlier projection of seeing between a 0.5 per cent expansion and a 0.5 per cent contraction.

The downgrade was made in light of rising global inflation and tightening monetary policies, which are dampening consumer spending.

The city’s five biggest lenders, including HSBC Holdings, Standard Chartered and Bank of China (Hong Kong), raised their key rates at the start of November to the highest levels in 14 years following rate increases in the United States to curb inflation.

Prices of flats measuring at least 752 sq ft slipped by 2.5 per cent, while those of smaller ones retreated by 1 per cent.

“Overall housing prices are expected to drop by 15 per cent in 2022,” Wong said, adding the government should consider removing various stamp duties to boost transactions.

It’s the biggest decline this year, and a similar drop is expected in the coming months

MARTIN WONG, KNIGHT FRANK

Citibank last week said home prices would bottom out in the second quarter of next year at the earliest following an estimated drop of 20 per cent from a record high in 2021. It said they would fall a further 10 per cent from October to the second quarter of 2023.

Last month, Goldman Sachs forecast a 30 per cent decline in home prices in the city over two years, while DBS said it expected a 5 per cent drop in 2023. Morgan Stanley, HSBC, JLL and Colliers have also predicted lower prices.

Meanwhile, home rents rose by about 0.3 per cent in October after remaining unchanged in September. On an annual basis, rents have declined by 1.75 per cent.