The results of the September Hong Kong Residential Market Survey showed that sentiment surrounding the housing market extended its decline. The Confidence Index, an amalgamated measure of short-term price and sales expectations, fell from -14 to -40, the lowest level since May 2016.
Respondents reported that home prices have been little changed over the past three months. This was evident both at the headline level, but also across each of Hong Kong’s three regions (New Territories, Kowloon, Hong Kong Island). Respondents also see a continued contraction in sales volumes, in net balance terms.
Buyer demand fell across the board, but data shows that the pullback was particularly acute in Kowloon. Respondents primarily attributed the drop in demand to falling interest from property investors, while demand from owner occupiers was largely unchanged from August. Demand from mainland Chinese buyers also contracted across the board, and, like headline demand, was particularly acute in Kowloon.
Against this backdrop, expectations for prices and sales contracted sharply. Price and sales volume expectations for the next three months are now firmly rooted in negative territory. Moreover, both prices and sales volumes are now seen contracting over the next year.
Price forecasts are now substantially below the three-month moving averages for each of New Territories, Kowloon, and Hong Kong Island, and are seen falling over the next year.
Although tenant demand remains fairly robust for the rental market, waivering confidence in the sales market appears to be having some affect on the outlook for rents. Despite what appear to be solid demand-supply fundamentals, respondents do not expect headline rents to increase over the next three months. One-year rental growth is also seen to be muted.
Tighter credit conditions may be a catalyst for this, as respondents reported a modest deterioration in access to credit for the second consecutive month; this is expected to continue for the next three months. This comes as some Hong Kong banks have begun to raise prime borrowing rates, and the US Federal Reserve is expected to increase interest rates again in December.
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.