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News & opinion

24 APR 2018

Contributors report demand increasing at a faster pace than supply

The March Hong Kong Residential Market Survey shows a continuation of positive momentum in the housing market. However, the Confidence Index, an amalgamated measure of short-term price and sales expectations, moderated to 31 in March from 44 in February.

Three-month expectations for price and sales appear to have been trending lower since peaking near the end of 2017. Though this is still indicative of respondents expecting prices in sales to increase over the next quarter. Indeed, prices seem poised to maintain steady year-on-year growth in the coming months, though sales are slighlty more noisy.

Respondents remain optimistic for price growth over the next year. In net balance terms, 12-month price expectations are the highest they’ve been since March of 2017, and are the second highest reading since the launch of this survey. Perhaps unsurprisingly, price forecasts for the next year have moved back above the three month moving average in all regions.

Some of the upwards pressure on prices has likely come from expectations for dampened supply. Expectations for supply growth have begun to diverge from that of prices; this is most pronounced in the New Territories, which also has the largest stock of housing of all three regions.

The supply-demand mismatch is evident

This shows that buyer enquiries continue to increase at a faster pace (in net balance terms) than the supply of new properties to buy, particularly in the New Territories. This may help to explain why respondents’ price forecasts for the New Territories are as bullish as those for Kowloon and Hong Kong Island, despite fewer respondents reporting an increase in demand in the former than the latter, in net balance terms.

There is an indication that respondents saw slightly more demand from mainland Chinese buyers in March. Meanwhile, a modest majority of respondents are expecting credit conditions to tighten over the next three months. However, it remains to be seen whether both of these developments are transitory.

The outlook for rents remains positive and evidence offers some explaination for this given that the increase in tenant demand continues to outstrip the supply of new properties to rent.

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