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While house prices continue to fall, the rental market remains robust
August 12, 2024 | Staff Reporter | Hong Kong | Property Management
Hong Kong's pre-owned home prices plummeted to their lowest in nearly eight years, with June's private property index dropping 1.24% from May and witnessing a sharp 13.1% year-on-year decline, despite a brief rise after the government lifted property controls.
After the Hong Kong government cancelled property market controls at the end of February, the city's real estate market experienced a brief resurgence in March and April, with the pre-owned private residential price index rising 1.06% and 0.29%, respectively. However, the index fell again in May, with cumulative declines in May and June reaching 2.55%, leading to a 1.7% drop in the first half of 2024, data from the Rating and Valuation Department shows.
The decline in real estate prices was primarily driven by small and medium-sized residential units. In June, the price index for units below 100 square metres fell by 1.27% month-on-month, with the most significant drop occurring in units between 40 to 69.9 square metres. Larger units above 100 square metres saw a smaller decline of 0.5%.
The initial euphoria after the cancellation of property controls has subsided due to a lack of positive news and a slower-than-expected economic recovery, said Louis Chan, Vice Chairman and Chief Executive of Centaline Property Agency Ltd’s Asia Pacific Residential Department. Developers have responded by offering significant discounts on new projects to attract buyers, leading to heightened pressure on second-hand property prices, Chan said.
Looking ahead, Chen Hai-chao, Research Department Manager at Ricacorp Properties, expected the property prices to continue to fall, with a potential 2% drop in the third quarter. Despite the downturn, Chan expressed cautious optimism for the second half of the year, suggesting that if interest rates fall, local funds might flow from bank deposits to the property market.
As of June, 19,300 residential units had been completed but remained unsold, with potential new home supply exceeding 100,000 units. Kathy Lee, Colliers Hong Kong's Head of Research, predicted a 5% to 10% price drop in 2024, driven by extensive discounts by property developers.
Notably, while home prices continue to fall, the local rental market remains robust. The rental index has risen for four consecutive months, reaching a four-and-a-half-year high in June, with a 1.61% increase in rents during the first half of 2024, data from the Rating and Valuation Department shows.
With the summer peak season bringing more international students and foreign talents to Hong Kong, rents are expected to rise by nearly 3% in the third quarter, potentially boosting investor interest and real estate market turnover in the second half of the year, Chan and Chen predicted.
