HK Housing Sales Jumped 50% in May, But Analysts Warn of Coming 10% Price Slide

Despite growing uncertainty over the US-China trade war and protests of a proposed extradition law, the value of homes sold in Hong Kong reached HK$78.4 billion in May, up 11.9 percent compared with April and 50.3 percent higher than the same month last year.

Data from the Hong Kong Land Registry showed that 8,208 sale and purchase agreements were filed for residential units during May, up 4.9 percent from April and a rise of 48.6 percent compared to a year ago.

The gravity defying performance, however, is showing greater risks of being brought down to earth, with some analysts predicting this week that tensions involved with the US-China conflict could bring down the property price by five to 10 percent by the end of the year, according to property analysts.

May Surge Part of a 2019 Upswing

Charles Chan, managing director of Savills Valuation and Professional Services in Hong Kong, told Mingtiandi that a recovery in property transactions began at the beginning of the year, when the US-China trade war seemed to be heading towards a more positive outcome. The US federal reserve also backed away from the idea of future interest rate hikes, which meant Hong Kong mortgage holders should also be spared any upswings in bank rates.

Beyond the rush in housing sales, the total consideration paid for all type of built real estate, including industrial and commercial, as well as housing, reached HK$90.3 billion last month, up 42.3 percent compared to May 2018. In terms of the quantity of transactions, 10,353 sale and purchase agreements for built property of all types were received by the government bureau during May, up 4.5 percent on April and 32.9 percent higher compared with the same month last year.

The rise in transaction volumes was fuelled by a flurry of activity in established housing estates where flats were sold for record prices as buyers scrambled to strike before prices go up any further.

The veteran market analyst cautioned, however, that the performance was unlikely to be repeated in the second half of 2019 as the deterioration in US-China relations will likely result in fewer transactions from this month onwards, with the dispute expected to have an adverse impact on Hong Kong’s economy and affect buyer’s confidence.

Chan added that Hong Kong’s property price could slide by five to 10 percent by the end of the year.

Trade War Kills Property Resurgence

Until the unexpected escalation of the trade war, Hong Kong was in the throes of a property bull run, with home prices jumping by about 11 percent this year, prompting UBS to forecast a rally that could last another 10 years.

However, on May 10, US President Donald Trump raised tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent and China retaliated with tariffs on $60 billion of US goods from June 1. As the US barred the use of telecommunications equipment made by companies deemed a threat to America’s national security, China counter attacked with a blacklist of unreliable entities.

The worsening US-China relations have already given investors reason to pause on investment decisions. In late May, two flats were sold out of 104 units on offer in three districts across Hong Kong, marking the worst sales weekend for developers since the city emerged from its five-month price correction in January, according to an earlier report by the South China Morning Post.

The number of real estate transactions slowed to 222 in the week that ended on May 23, a drastic slowdown compared with the 2,000 units sold in the first 16 days of the month, according to the Hong Kong Economic Times.