Hong Kong house prices dip for first time in 6 months

HONG KONG (July 31): House price in Hong Kong has finally taken a dip after holding up for six months amidst the external year-long trade war between US and China, as well as internal mass street demonstrations.

Known to be among the world's most expensive property markets, prices for private homes in the global financial hub dropped 0.8% in June, compared to a revised 1.3% increase in May, according to its government data today.

Its residential sales volume also dived 43.6% in June from the month before - its lowest in four months - based on its Land Registry data early July, reported the Reuters today.

Consumer sentiment in the open economy has been shaken by the Sino-US trade war, China's slacking economy and the social tension, which started in June, and have recently escalated to violence.

The proposed extradition law, which allows for locals to be sent to mainland China for trial, has prompted some Hong Kong tycoons to begin transferring their personal assets overseas even before June.

Some realtors say the protests could last for months, further pressing on property prices.

"The (price) index is within expectation. Judging from the recent social movement and market condition, the index may further correct downward in the next one, two months," executive director of Knight Frank, Thomas Lam said. He forecast a 5% decline in the 2H2019.

The real estate consultancy also expected residential prices to reflect the movements in the local stock market. The Hang Seng Index has lost almost 10% since May, and property prices will usually follow the same pattern within three months.

Housing prices had kicked back almost 10% in 1H2019 after a drop in late 2018, provoked by the trade war between the two world economic giants.

Over the last 10 years, super-low borrowing rates, limited supply and an influx of mainland Chinese buyers have caused house prices to shoot up 200%. In June, official data showed a 646 sq ft apartment on Hong Kong Island commanding an average of HK$11.1 million (RM5.86 million).

Some real estate agents said the political unrest will affect the market short term. The pent-up demand, scarcity of land and anticipation of lower interest rates are expected to hold up the property market long-term.

Meanwhile, Colliers International predicted a 4% decline in housing price in 2H2019, but Midland forecast another 3% to 5% increase.

Property developers are expected to respond to the muted sentiment.

"They might slow down construction work on their new projects if market sentiment and the outlook are not optimistic," said property consultancy JLL.