Homebuyer confidence in Hong Kong’s residential market, which as recently as April had led experts including UBS to predict a bull run that would last at least another decade, is in a state of free fall, according to a Citibank Hong Kong survey of residential property ownership.
With over three months of social unrest squeezing the Asian financial hub, over half of the respondents to Citi’s survey said that they expected home prices in the city to fall in the next 12 months, up 28 percentage points from the previous quarter.
The results of the Citi survey come just two weeks after Cushman & Wakefield reported that home transaction volumes fell by 45 percent in July and August compared with April and May, and by 19 percent compared with the same two months last year.
56% Predict Home Prices Will Fall
According to Citibank, Hong Kong residents predicting a drop in home prices doubled to 56 percent from 28 percent last quarter.
“The results show that many local citizens are expecting a continuous fall in property prices, but the overall interest in property ownership sees no material change despite their views on the property market, in which respondents aged under 44 still express a relatively stronger interest in buying homes,” said Josephine Lee, Head of Retail Bank, Citi Hong Kong.
While 26 percent of respondents said that prices would remain flat over the next twelve months, a more optimistic 18 percent expect home prices to rise over the same period.
The last time Citi’s regular survey recorded an equivalent level of pessimism about the housing market was at the end of 2018 when 57 percent of respondents said that house prices were due to fall.
Now Is a Terrible Time to Buy
As protestors clash with police each weekend, almost two-thirds of respondents said that they thought now was a terrible time to buy a home, when asked by Citi to take into consideration their current standard of living and family finances.
Only 3 percent of respondents felt that now is a good time to buy, undeterred by the sight of almost ten percent of storefronts in Causeway Bay standing empty, while 29 percent of respondents were neutral about whether the present was an auspicious moment to invest in a home.
20 percent of respondents said they retained a strong interest in purchasing a property, a five percentage point drop from last quarter’s figure.
Just over half said buying a home did not interest them, while 29 percent remained neutral.
Three Straight Months of Declining Prices
The shift in buyer outlook comes as home prices have declined for three straight months after reaching a peak in May.
According to Midland Property’s weighted average of transactions at the 100 most popular secondary housing estates in Hong Kong, average housing prices in the city were HK$13,739 per square foot in May. By August those average rates had fallen 3.5 percent to HK$13,252 per square foot.
In a recent report, Cushman & Wakefield indicated that 8,889 residential sale and purchase agreements had been signed in Hong Kong during July and August, down by 45 percent from April and May. The agency indicated that by mid-September prices for homes in the City One residential project in Shatin and in the Taikoo Shing area on eastern Hong Kong island had fallen by up to 5 percent from their June levels.
The property services firm said that prices for luxury homes in Hong Kong remained on a firmer footing, with Residence Bel-Air in Waterfall Bay and West Kowloon’s The Habourside falling about 3 percent over the same period.
“Despite the worsened market sentiment and drop in sales, landlords generally have strong holding power and thus panic sales have so far been sporadic,” said Alva To, Cushman & Wakefield’s head of consulting for Greater China. “Should the current unrest continue, we would expect a further drop in home prices by 5 to 10 percent through the end of this year.”
Despite the recent drop in prices, Cushman & Wakefield pointed out that prices in City One Shatin and Taikoo Shing were up by 19.9 percent and 14.9 percent respectively since the beginning of the year, while home prices at Residence Bel-Air and The Habourside remain 10 percent higher than the level at the end of 2018.