The results of the October Hong Kong Residential Market Survey showed that sentiment surrounding the housing market extended its decline. The Confidence Index, an amalgamated measure of short-term price and sales expectations, fell from -40 to -78, the second lowest level on record since February 2016.
Respondents reported the first decline in prices over the last three months since June 2016. All three regions — New Territories, Kowloon, Hong Kong Island — reported declining prices over the last three months. The declines were particularly acute on Hong Kong Island, where a net balance of 67% of respondents said that house prices declined over the last three months.
Against this backdrop, declines in prices are expected to persist over the next three months. Contributors’ one-year price forecasts are similarily downbeat, headline prices are expected to decline nearly 8% over the next year. Respondents in the New Territories, on average, see a 9.2% pullback in prices over the next twelve months.
Similarly, respondents also reported a further decline in sales over the last month. Sales also continued to decline over the next three months and over the next year.
One of the factors potentially driving this is the gap between demand (new buyer enquiries) and the supply of new properties to buy (landlord instructions to sell). This gap is the widest since January 2016 as respondents are reporting demand declining at a faster
pace than is supply (in net balance terms). The gap is evident across all three regions and is particularly wide in the New Territories.
Contributors also noted an acute drop in buyer enquiries from both owner occupiers and investors. Enquiries from potential buyers from Mainland China were also reported to have declined at the quickest pace on record, in net balance terms — this was spread fairly evenly between all three regions.
Credit conditions also continued to tighten. For the third consecutive month, respondents said that they expect conditions to continue to tighten in the near term.
The decline in prices is also starting to spread to rents. Rents are now expected to decline over the next three months, and are also seen to be declining over the next year.
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.