A motorway is seen in a gap between residential buildings (left) and a hotel (right) in Hong Kong on May 12, 2021.
(ANTHONY WALLACE / AFP)
HONG KONG – House prices in Hong Kong have been on the bull run with the price index of private domestic units hitting a 26-month high of 396.3 by late July, just 0.15 percent below the record highs of May 2019, the Rating and Valuation Department said on Friday.
“I believe surpassing the historical peak is just a matter of time, and will likely be seen very soon,” said Keith Chan, director and head of research at Cushman and Wakefield, a global commercial real estate services firm. Prices in certain residential developments tracked by the company have already surpassed their respective historical peaks, Chan said.
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Analysts attribute the bull run to the low interest environment, strong economic growth, an improved unemployment rate in the city as well as the potential opening of the border
The price index of private domestic units, tracked by the RVD in July added 0.46 percent from the previous month and 2.83 percent year-on-year, pushing the cumulative rise to 4.3 percent this year, up 2.69 percent compared with same period last year. The rental index added 0.5 percent from the previous month to 179.4 in July, representing the fifth consecutive monthly rise. The rental index of residential flats in the city has advanced a cumulative 1.59 percent this year.
Analysts attribute the bull run to the low interest environment, strong economic growth, an improved unemployment rate in the city as well as the potential opening of the border. “Due to the low interest rate environment, people find it more attractive to own rather than renting a flat,” said Martin Wong, director and head of research and consultancy for Greater China at global real estate consultancy Knight Frank. He expects the housing prices to set a record in the third quarter, lifting the overall growth to 5 to 8 percent over the whole year.
“Domestic capital, mainly end users, has been the key demand driver,” Chan said, adding that the expectation of returning normalcy unpinned by the rising vaccination rate encourages homebuyers, especially end users, to commit the purchase earlier than later, as the resumption of the cross-border travels may bring in overseas purchasing power, which could push the prices higher.
The market for units or a saleable area smaller than 100 square meters — often popular with end-user buyers — has been robust, with the price index for the category advancing to 399.3, the highest since May 2019.
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“The ease of loan-to-value ratio allows more people to get on the property ladder, especially for those properties below HK$10 million ($1.28 million),” Wong added.
Hong Kong’s economy grew 7.6 percent year-on-year in the second quarter while unemployment fell to the lowest level since the pandemic to 5 percent for the period between May and July, easing significantly compared with the 7.2 percent for the three months ending in February, the worst reading since 2004.
The “domestic economy has been recovering faster than expected,” said Chan. He expects property sales to slow down and prices to stay flat in the near term as home prices approach their peak in the short term.
“In the longer term, price growth will likely continue, due mainly to solid fundamentals such as strong housing demand, low borrowing costs, limited new supply and a recovering economy,” Chan added.
xinlanzeng@chinadailyhk.com