The results of the November 2018 Hong Kong Residential Market Survey show that market sentiment remained downbeat. The Confidence Index, an amalgamated measure of short-term price and sales expectations, has been negative since August and was little changed in November from October.
Respondents reported price declines for the second consecutive month in November. The contraction in prices continued to be widespread, and not confined to a specific region (New Territories, Kowloon, Hong Kong Island). Similarly, sales volumes were reported to contract for the fourth consecutive month, though the contraction in volumes in the New Territories was less acute than in Kowloon or Hong Kong Island.
Against this backdrop, expectations for prices and sales volumes remain firmly rooted in negative territory over the next three months and twelve months. One-year price forecasts have appeared to stabilise around the three-month moving average, with contributors expecting approximately a 6% pullback in headline prices over the next twelve months.
Underlying supply and demand conditions were little changed in November from October, as new buyer enquiries were reported to have contracted at a quicker pace than the contraction in new instructions to sell. This was particularly visible in the New Territories, where the stock of properties for sale increased in November. Generally, the supply of properties for sale has been less elastic than buyer demand, though anecdotal evidence has suggested that both buyers and sellers may be sitting on the side-lines following the recent moderation in prices, which is likely a contributing factor to the decline in market liquidity.
The pullback in demand was evident from both investors and owner-occupiers, though the pullback in demand from owner-occupiers did moderate slightly in November from October. Demand from buyers in mainland China was also negative for the fourth consecutive month.
Expectations for the lettings market were less subdued than the sales market as supply-demand conditions are more balanced. However, rents are still expected to decline over the next three months. Headline rents are also expected to be slightly lower over the next twelve months, though rents on Hong Kong Island are expected to be little changed over the next year.
The Hong Kong Residential Market Survey is a leading sentiment indicator of conditions in the Hong Kong residential sales and lettings markets.
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Senior Economist, Asia Pacific
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.