The results of the August Hong Kong Residential Market Survey point to a considerable slowdown in price inflation over the past three months. However, prices have continued to increase nonetheless.
Respondents reported a pullback in headline demand in August for the first time since 2016. This was particularly acute in Kowloon and on Hong Kong Island. Both owner-occupier and investor enquiries were reported to have declined across all three regions (the New Territories, Kowloon, Hong Kong Island). Similarly, mainland Chinese buyer enquiries decreased across all areas, having reportedly increased in July.
Respondents also indicate the supply-demand balance is a drag on prices. Although the supply of new properties in Kowloon and Hong Kong declined in August, it did so at a slower pace than demand. Meanwhile, in the New Territories, although buyer enquiries did not change very much, the supply of houses for sale in the area continued to increase.
Credit conditions were also reported to have deteriorated slightly in August as HIBOR rates increased. Respondents expect a continued deterioration in credit conditions in the near term, as the US Federal Reserve appears set to raise interest rates further. Against this backdrop, prices are expected to decline over the next three months and respondents expect to see little change over the next year at the national level. However, respondents indicate that they foresee home prices on Hong Kong Island declining over the coming year. Contributors noted that higher interest rates are likely to be a factor in cooling the housing market in the coming months.
Meanwhile, sales volumes are seen declining over the next three and twelve months. This downbeat assessment is predominantly driven by a decline in volumes in the New Territories over the next year, respondents see little change sales volumes in Kowloon and on Hong Kong Island on the same basis.
Despite some concerns over the impact of a China-US trade war on economic activity, respondents see rents increasing over the next three and twelve months; however, this has moderated in recently. Although the pace of increase in tenant demand has slowed, this appears to be offset to some degree by a tighter supply of properties to rent on the market.
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.