HOME SELLERS ‘HAVE MISSED OPPORTUNITY FOR A GOOD DEAL’
Analysts expect housing prices to fall further amid poor economic outlook and rising interest rates
Homeowners in Hong Kong looking to sell have missed the window for striking a favourable deal, analysts say, as they expect property prices to continue to slump after touching the lowest level in five years.
The Centa-City Leading Index, a gauge of lived-in homes compiled by Centaline Property Agency, fell 1.6 per cent to 159.76 for the week ending November 20 and dipped a further 0.4 per cent to 159.16 for the week to November 27, the lowest since October 2017.
While the index has lost 16.8 per cent since it hit a record high of 191.34 in August 2021, Centaline expects a further 9.5 per cent drop to 144 by Lunar New Year in late January.
If the gauge hits 144, a level last seen in 2016, the overall decline could touch 24.7 per cent.
Price declines in some estates have already exceeded that level, slumping by as much as 30 per cent since the peak.
“The decline in home prices has not stopped,” said Wong Leung-sing, senior associate director of research at Centaline.
“If there is no good news in the market that can cause fluctuations, the index will test the 144 level around Chinese New Year.”
At Telford Gardens in Kowloon Bay, prices have plummeted 30 per cent from HK$15,151 per square foot in September 2021 to
HK$10,602 per square foot in the week ending November 20. Greenfield Garden in Tsing Yi has seen prices sink 28.9 per cent from HK$16,470 per square foot in late-August 2021 to HK$11,706 per square foot.
Centaline’s view was echoed by Natixis. Hong Kong’s property prices will eventually decline 25 per cent from the peak in 2021, the French bank said in a report.
Prices would fall 12 per cent next year but the pace would slow to 2 per cent in 2024, Natixis said, citing “the perfect storm of yet another economic recession and sharply rising interest rates” following increases by the US Federal Reserve.
“The question is how deep the dive will be and when it will end, especially given the recently stronger structural headwinds, such as depopulation,” the report said.
Some 113,000 people left the city between mid-2021 and mid2022, continuing a trend for a second year amid an emigration wave that has seen Hongkongers leave for countries including Britain, Canada and Australia.
Among the 112 large-scale housing estates tracked by Centaline, the average prices at 73 estates have fallen by more than 10 per cent this year and by more than 20 per cent in eight estates.
Riviera Gardens in Tsuen Wan saw the biggest drop, with prices sinking 23.7 per cent to HK$11,044 per square foot this year.
Meanwhile, loss-making lived-in housing transactions stood at 186 in October, or 11.6 per cent of overall sales, the highest since October 2009, according to Ricacorp Properties.
One of the biggest losses in absolute terms this year was on a 3,835 sq ft, five-bedroom duplex at 39 Conduit Road in West MidLevels. The property sold for HK$378 million, a loss of HK$22 million, in November, according to official records and agents. Including expenses such as taxes and commission, the loss adds up to HK$42.78 million.
Many homeowners who are about to emigrate and in a rush to sell are also willing to accept lower prices.
At Heng Fa Chuen, a homeowner about to leave the city sold a 658 sq ft flat for HK$8.93 million in mid-November, HK$1.8 million, or 17 per cent, less than the price paid three years ago, according to Centaline.
Agents desperate to attract potential homebuyers and drum up sales are resorting to creative catchphrases to promote listings in the streets and branches. These usually feature reasons for heavy price cuts, such as emigration and stock market losses.
The outlook for next year appears equally bleak. Goldman Sachs has forecast a 30 per cent decline between 2022 and 2023, while DBS expects a 5 per cent drop in 2023.
Morgan Stanley, HSBC, JLL and Colliers have also predicted lower prices. JPMorgan expects buying sentiment to recover after May next year, but it still predicts a fall of 8 per cent in 2023, it said in a report.
Analysts also expect higher interest rates to weigh on sentiment. The Hong Kong Monetary Authority raised its base rate to 4.25 per cent from 3.5 per cent in early November, the sixth increase in eight months to a fresh 14-year high, in lockstep with the Fed.
The market believes interest rate rises will last until the first quarter of next year, according to Raymond Cheng, managing director at CGS-CIMB Securities.
“Home prices will almost [bottom out] between the first and second quarter,” Cheng said.
With prices having fallen by about 15 per cent so far, they could decline by a further 5 to 8 per cent in the next few months, and with that it would be probably over, he added.
Home prices will almost [bottom out] between the first and second quarter
RAYMOND CHENG, MANAGING DIRECTOR, CGS-CIMB SECURITIES