Respondents to the latest Hong Kong Residential Market Survey indicated that headline price inflation over the past three months has remained near cyclical highs. July sales volumes were also reported to have increased at a similar pace to June.
This is despite July registering the most modest pace of increase in buyer demand thus far in 2018; this was largely driven by contributors from Hong Kong Island indicating little change in demand from June. Meanwhile, although supply remained constrained in the New Territories, contributors reported that the supply of properties for sale increased at a faster pace than demand in both Kowloon and the New Territories. Demand from buyers in mainland China also increased at a more modest pace than in June, as mainland enquiries for properties in the New Territories slowed.
The confidence index, an amalgamated measure of short-term price and sales expectations, moderated only slightly in July. Both prices and sales are expected to increase at a robust pace over the next three months. However, there seems to be an indication that equity market investors hold a less sanguine outlook. Meanwhile, although price expectations over the next year remain elevated, sales volumes are seen increasing at a more moderate pace over the same period.
Against this backdrop, aggregate one-year price forecasts came in below the three-month moving average for the second consecutive month. Contributors now see prices increasing by 3% over the next year on Hong Kong Island, by 4% in the New Territories, and by 4.9% in Kowloon.
The lettings market was also seen to maintain positive momentum as tenant demand increased at a faster pace than did the supply of properties to rent. Rents are expected to maintain their recent pace of inflation over the next three months, though growth forecasts have moderated in recent months across all three regions.
Respondents continued to report no change in credit conditions in July, and expect this to persist over the next three months. One-month HIBOR rates hit a 2018 high of 2.125% late in June, but have since retreated below 1.5% by early August, and banks have remained reluctant to increase prime borrowing costs. However, the medium term outlook for borrowing costs remains skewed towards the upside.
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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.