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18 SEP 2019

Civil unrest stalling Hong Kong’s housing market over the coming year

Sean Ellison

Sean Ellison

Senior Economist, Asia Pacific

Sydney

RICS

The results of the August 2019 RICS-Spacious Hong Kong Residential Market Survey indicate a continued decline in prices, sales volumes and rents.

Ongoing political unrest as well as trade tensions between China and the U.S. has continued to dampen Hong Kong's housing market sentiment. The newly published RICS-Spacious Hong Kong Residential Market Survey shows that the Confidence Index continues to fall, dropping to -76 in August from -54 in July.

Both buyer and rental demand have deteriorated significantly, with rental demand recording its first negative reading in the survey's history.

Market outlook downbeat

During the most intense period of protests, nearly 70% of respondents have cited some degree of price decline over the past three months. Prices, sales volumes and rents are expected to decrease over the next three months.

During the next year, average sale prices are expected to fall 4.6% across Hong Kong, sales volumes are seen slipping 5.3% and rents down 2.5%. The market outlook prediction seems to be a significant reversal since June, where survey contributors anticipated an increase on all three of these metrics.

Medium-term outlook more subdued

Participants also commented that a cessation of the protests appears to be unlikely in the near-term, which appeared to contribute to the more subdued medium-term outlook for the market. Some survey respondents also cited tariff escalation between China and the U.S. as a headwind.

Although current sentiment is similar to when trade tensions escalated and when interest rates were expected to increase in October 2018 and February 2016 reports respectively, a clear resolution to the city's unrest is proving to be elusive and as a result sentiment may remain subdued for a more prolonged period this time.

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Sean Ellison

Sean Ellison

Senior Economist, Asia Pacific

Sydney

RICS

Sean is responsible for the RICS Economics team’s research into the Asia-Pacific property sector, identifying market risks to the sector and analysing economic events and their effects on real estate.

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