Housing prices are expected to stabilise with buying power released.
Following the COVID-19 outbreak that started during the Chinese New Year holiday, Hong Kong’s housing market was expected to experience months of stagnation. However, according to the government’s residential property price index, home prices in fact only dropped 1% in the first quarter of 2020. As we entered Q2, without the launch of any major new developments, the number of transactions in the secondary market quickly rose, prompting industry insiders to predict that once the epidemic becomes under control, housing prices will stop its downward trend and even rebound. On the other hand, property developers have been busy planning new launches, hoping to capture the buying power that’s been accumulating in the first half of the year.
Figures released by the Rating and Valuation Department show that the private domestic price index increased 0.43% month-on-month in March closing at 375.3. This growth, the first in four months, was largely driven by small- and medium-sized units. In March, the private domestic price index for Class A-C properties (small- to medium-sized units) was 377.9, up 0.45% month-on-month. In contrast, the price index for large residential units was 311.8, falling 1.02% month-on-month. Overall, the private domestic price index dropped a total of 1.02% in Q1, marking a 0.9% year-on-year decline.
Kitty Ngan King-fung, Director of Sales and Marketing at Grand Ming Group Holdings Ltd., observes that from January to April, due to the viral outbreak and social distancing rules, developers decided to postpone the launch of their large projects, resulting in a significant drop in the number of housing transactions. She says that according to statistics from the Land Registry, the number of primary market transactions in Q1 fell approximately 57% year-on-year, while secondary market transactions only experienced a mild 7% decrease. This goes to show that the primary reason of the downturn was the lack of major new developments, which forced some buyers to turn to the second-hand market.
Ngan adds that without new major developments, buyers switched their focus to leftover new units in the primary market, and some of those remaining units did in fact attract considerable attention, proving that homebuyers will always be willing to make purchases as long as it’s at a reasonable price point. She believes that once the outbreak is brought under better control, buying power will be gradually released back into the market, leading to a stabilised second half of the year. while small- to medium-sized units will continue to enjoy market enthusiasm. With the launch of multiple new large projects, Ngan expects to see a major increase in primary housing transactions. As for the government’s current stance of not cancelling the cooling measures, she believes its intention is to help the public become homeowners, and these measures will remain if home prices don’t fluctuate drastically.
As Kerry Properties’ executive director Chu Ip-pui sees it, the market atmosphere has been improving since April, thanks to the continued supply shortage and low rate environment. Mont Rouge, Kerry’s own luxury development in Shek Kip Mei, for example, has seen an increase in prospective buyers coming to see the property in recent months. “There are quite a few advantageous factors in the housing market. It is my view that the hardest days are behind us for now, and if the situation with the outbreak continues to improve, the market will slowly bounce back,” he says.
Chu goes on to say that with housing prices suffering a very mild hiccup in the first half of the year, if the Hong Kong economy manages to improve along with COVID-19, it will have a positive psychological impact on potential buyers in the second half of the year. This, he adds, would also depend on the results of the government’s stimulus policies. The Wong Chuk Hang Station Package Two Development, a collaboration between Kerry Properties and Sino Land, will likely to be launched in the first half of 2021 as scheduled, Chu says.
Sammy Po Siu-ming, chief executive of Midland Realty’s residential division, explains that the little more than half-year span following last June, both the primary and secondary housing markets suffered a triple-whammy of social unrests, US-China trade conflicts and the COVID-19 outbreak. As a result, buying and selling activities started to fall away and prices dropped from the high levels in 2019. However, buying power has been amassing during this period and will be released as soon as the third quarter, consequently driving up transactions with the possibility of a U-shaped rebound.
The number of home seekers hasn’t diminished, Po continues, they have just chosen to stay put during market uncertainties. He adds that developers will regain confidence and start to roll out new projects again and the large supply of new units will boost the market atmosphere. And if the first batch of units offers conservative pricing, it would surely draw buyers’ attention back to the primary market, making it once again the driving force of the market. Should the outbreak situation and the economy improve, the housing market will have a real chance at a strong comeback in the second half of the year.