Hong Kong lived-in homes see valuations drop amid fifth Covid wave
The valuations of Hong Kong’s lived-in homes are expected to head south as a fifth Covid wave linked to the Omicron variant takes hold and deals plunge because of fewer viewings, brokers said. Banks may reduce valuations by 1% to 2% in February and by another 1% next month, with midscale estates like Kornhill Garden and Taikoo Shing expected to bear the brunt.
“The valuations will head south in February, as home prices in late January dropped and may be down this month too,” said Sammy Po, CEO of residential in Hong Kong and Macau at Midland Realty.
Hong Kong confirmed more than 600 new Covid cases on Feb 7, nearly twice as many as the day before. This surge in infections is likely to affect the usual seasonal boom that follows the Lunar New Year.
Eric Tso, chief vice-president at mReferral Mortgage Brokerage Services, echoed the view that overall bank valuations may drop 2% to 3% in the coming month.
And while lower valuations will lead to lower mortgage loans, mortgages that are already fixed are not expected to be affected.
Estates such as Kornhill Garden and Taikoo Shing will see slightly bigger drops of about 3% to 4% these two to three months, than estates targeting first-time buyers, said Midland’s Po. The demand
for such estates, whose buyers tend to be those seeking upgrades, is not as strong as that among first-time buyers, Po added. The buyers for these estates may adopt a wait-and-see approach amid the latest surge in cases.
For example, a 524 sq ft flat at Kornhill Garden reportedly saw a 3.4% m-o-m drop, or a decline of about HK$310,000 ($53,490), in an online valuation by HSBC, to HK$8.79 million in early February. Taikoo Shing also saw a 580 sq ft flat drop 3% m-o-m to HK$10.49 million in early February. It is down 6% from early November.
Homeowners offered bigger price reductions, leading to more deals at lower prices, which would gradually be reflected in valuations, said Ivy Wong, managing director at Centaline Mortgage Broker.
While valuations might drop by an average of 2% in February, some estates may see isolated deals with a bigger price cut of up to 6%, leading to bigger drops in valuations when valuers make reviews, she added.
Centa Valuation Index, a weekly gauge that tracks major banks’ valuations for used homes in 133 housing estates compiled by Centaline, plummeted 75%, from a peak of 93.42 in early August 2021, to 23.12 in late December. It then recovered to 39.85 for the week ended Jan 23.
An index reading below 40 indicates a bearish view among banks and a downward trend in home prices.
The number of transactions for lived-in homes in January marked a 23-month low of 2,944, down 11.2% m-o-m, according to Centaline Property Agency. The corresponding value also set a 17-month low of HK$27.9 billion, down 7.8% m-o-m.
“The figures mean secondary market turnover turned sour,” said Wong Leung-sing, a senior associate director of research at Centaline, who expected the number of deals to remain below 3,000.
A survey by Citi Hong Kong of more than 500 Hongkongers on residential property ownership in the fourth quarter of 2021 found that more than 60% were not interested in property ownership at present, the highest percentage in the past five years.