The results of the February 2019 RICS-Spacious Hong Kong Residential Market Survey point to a continued stabilisation in Hong Kong's housing market.
The Confidence Index, an amalgamated measure of short-term price and sales expectations, increased sharply from -25 in January to +7 in February. This is indicative of a stabilisation in conditions since the index bottomed in October 2018 at -78, and was the first non-negative reading since July 2018. As shown in Chart one (pictured left), the pickup was particularly acute on Hong Kong Island, where the Confidence Index increased to +26 in February.
Respondents continued to report a modest contraction in prices over the past three months, though in net balance terms the pullback in prices was at a significantly slower pace than was reported in the past four months. Contributors expect aggregate prices and transaction volumes to remain unchanged over the next three months, and rents are expected to post a modest increase. Meanwhile, on Hong Kong Island, prices, transaction volumes, and rents are all expected to increase over the next three months, the first-time respondents have expected this since June 2018.
Spacious' user data has recorded three months in a row of improving sale market enquiry rates, which is a proxy for buyer demand that indicates increased transaction volumes in the near term. Enquiry prices have stabilised in the sale and rent markets but sellers and landlords were still reducing listing prices in February as the marketplace looks to be searching for equilibrium following recent volatility.
James Fisher, COO and Head of Market Analytics, Spacious
The outlook for prices and rents for the next twelve months have similarly improved. Contributors expect headline prices to decline just 0.3% over the next year, less than the three month average of a 3% decline. Meanwhile, headline rents are now expected to increase 0.9% over the next year, above the three-month-moving average forecast of no change.
Respondents have indicated that the market has stabilised in early 2019. Although pent-up demand and an undersupply of housing act as a cushion for the market, risks appear to still be skewed to the downside. Namely, a recurrence of trade tensions or underwhelming economic growth from China would likely result in another pullback in demand. Against this backdrop, there is more caution in the outlook for rents and prices than in recent years.
Sean Ellison, Senior Economist, Asia Pacific, RICS
This optimism may be driven by a shift in supply and demand fundamentals; new enquiries from buyers increased for the first time since July 2018. This aligns with anecdotal evidence from respondents who said that buyer demand had started to recover following the Lunar New Year holiday. The increase in demand appears to be driven by owner occupiers, as contributors are reporting little change in demand from investors and buyers from mainland China. Meanwhile, the supply of properties being made available for sale was seen to be little changed from January.
A similar dynamic is seen in the rental market. Tenant demand was reported to have increased at a robust pace in February, while the increase in properties available to rent was more modest.
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.