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21 JAN 2019

Prices, volumes and rents extend recent decline

Sean Ellison

Sean Ellison

Senior Economist, Asia Pacific

Singapore

RICS

The results of the December 2018 Hong Kong Residential Market Survey show that respondents continue to see declining prices and rents across Hong Kong. Respondents are reporting the fastest decline in prices (in net balance terms) since March 2016, across all three regions of Hong Kong.

Demand remained soft according to survey respondents, with headline buyer demand reported to have declined for the fifth consecutive month. The decline in buyer demand was particularly soft amongst investors and buyers from mainland China; demand from owner-occupiers also declined though at a more modest pace in net balance terms.

Meanwhile, the supply of properties for sale continued to be less elastic than buyer demand. For the third consecutive month, respondents reported a modest decline in new instructions to sell. As a result, headline sales volumes were reported to have declined for the fifth consecutive month, especially in Kowloon and on Hong Kong Island.

Against this backdrop, overall prices and sales volumes are seen declining over the next three months. The declines are seen to be particularly acute on Hong Kong Island, where almost all contributors expect prices to contract over the next three months.

The pullback in prices and volumes is seen persisting over the next 12 months. Contributors see headline prices declining 7.6% over the next year, though they are expected to fall further in Kowloon (9.4%) and on Hong Kong Island (8.5%) than in the New Territories (6.2%).

A similar dynamic was seen in rental markets. Although the supply of rental properties is relatively balanced with tenant demand to rent, both metrics changed little in December. Meanwhile, headline rents are expected to decline over the next three months and twelve months, particularly in Kowloon where respondents are expecting a 3.5% pullback over the next twelve months.

Although the outlook for interest rates is slightly more benign, respondents continue to report tighter credit conditions. This also indicates that credit conditions are expected to remain tight over the next three months.

Spacious saw a recovery in our equiry data signal in December, which signals an increase in transaction volumes in the near term. January month-to-date has seen a further improvement in this signal. While an improvement, this comes on the heels of near-record low transactions seen in December and a significant recovery in transactions is required to return to recent average levels. The improvement in demand appears to be largely due to the deterioration in prices, which have yet to show signs of stabilisation in our data. The cooling of interest rate increase expectations and the recovery in equity markets over the past month are net positives in the near term.

James Fisher, COO & Head of Data Analytics, Spacious

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Sean Ellison

Sean Ellison

Senior Economist, Asia Pacific

Singapore

RICS

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.

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