The results of the July 2019 RICS-Spacious Hong Kong Residential Market Survey show that the ongoing protests have begun to weigh on market activity.
The Confidence Index fell from +4 in June to -54 in July, the lowest level since December 2018. Recall in December 2018 trade tensions between the U.S. and China were significantly escalated and the U.S. central bank had recently increased interest rates (and was expected to continue to do so).
Respondents comments indicate that the ongoing protests in Hong Kong have begun to negatively impact the market. Note that in the June survey, 57% of respondents said that the protests were expected to negatively impact buyer demand (chart to the right). Respondents also noted the ongoing trade dispute between the U.S. and China as having adverse consequences on the market. Interestingly, credit conditions were also said to have tightened, and are expected to continue to tighten despite the more benign outlook for interest rates.
A sharp pullback in buyer demand
Prices appear to have begun declining as 38% of respondents reported prices fell to some degree during the past three months. Meanwhile, survey participants noted a fairly sharp pullback in buyer demand in during July. The drop appears to be driven by buyers from mainland China as well as owner-occupiers, as demand from investors appears to be holding up for now.
Sales market weakness is expected to persist in the shortterm, with both prices and volumes expected to decline over the next three monghts. Volumes are also expected to contract over the next twelve months, and expectations for prices are significantly more subdued than during the June survey. Data shows that 53% of respondents expect prices to decline over the next twelve months.
The rental market was slightly more resilient than the sales market, though data shows that demand was flat in July amid increasing supply. Rents are expected to increase only marginally over the next year.