Sentiment rebounds as respondents report a return in buyer demand
The results of the March 2019 RICS-Spacious Hong Kong Residential Market Survey show a sustained rebound in sentiment in Hong Kong’s housing market.
The results of the April 2019 RICS-Spacious Hong Kong Residential Market Survey shows that sentiment remained elevated in April. The Confidence Index held steady at +50 in April (versus +53 in March), which is well above the long-run average of +7. Note that survey responses were collected between April 22 and May 12, which partially includes the period of renewed trade tensions between the United States and China.
Respondents continued to report increasing prices during April. A weighted average of 50% of respondents reported prices increased up to 5% in April (versus 53% in March). More respondents also reported a faster increase in prices, with 19% reporting price increases between 5% to 8%, up from 8% in March. Meanwhile, just 12% of respondents reported price declines in April, in stark contrast to December when 89% of respondents were reporting price declines.
Fundamentals remained supportive of rising prices. The pace of increase of headline demand was said to have increased during April while the increase in the supply of properties for sale slowed (in net balance terms). The spread was particularly stark in the New Territories, where a net balance of 45% of respondents reported increased buyer enquiries but a balance of only 9% reported an increase in instructions to sell.
Against this backdrop, most survey participants were optimistic about the outlook for the market. Prices, sales and rents are all expected to increase over the next three months. Meanwhile, prices and rents are expected to increase over the next year, though there is some discrepency by region as Kowloon and Hong Kong Island are expected to see larger increases than the New Territories.
"Spacious' user data for April showed a moderation in sale market enquiry rates," says James Fisher, Spacious COO and Head of Market Analytics. "Enquiry rate, a proxy for buyer demand, remained strong compared to historical levels, but moderated from the high level seen in March.
"Given that the April transaction volume was very strong, a volume only achieved once since October 2012, the moderation was not surprising. Enquiry price and listing price signals were positive for both sales and rentals, a bullish indicator for pricing. The potential for trade war escalations and their impact on the Hang Seng and RMB, which are both down 7% since 5 May, will test the market's strong recent performance. That said, Spacious observed no material deterioration in equiry rates when comparing the periods two weeks before and two weeks after 5 May."
The April Survey results indicate that sentiment in Hong Kong's housing market remains upbeat. It appears that buyers who withheld from the market during the September–January downturn are re-entering, and supply has also been quick to respond. However, the timing of the survey means that respondents may not have fully priced in the impact of the renewed escalation of trade tensions between the United States and China.
Sean Ellison, Senior Economist, Asia Pacific, RICS
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.