Hong Kong rents and prices are set to fall further
Originally published at the South China Morning Post on December 1, 2015.
A window of opportunity is opening for renters and buyers as home rents and prices across the city are forecast to dip further in the coming months.
Following a 19-month rise, property experts now predict rents and housing prices to decline by about 8 per cent to 10 per cent next year. The fall is attributed to a run of new housing units and a cooling of investor sentiment as China’s economy slows and property owners prepare for a rise in US interest rates expected this month.
Rents per square foot at 50 housing estates across Hong Kong declined for the second consecutive month in October, falling by 0.8 per cent from September, according to the latest figures from agency Ricacorp Properties.
Homes in Kowloon dropped the most, by 1.3 per cent, followed by the New Territories at 0.6 per cent and Hong Kong Island at 0.2 per cent.
Hide Lau, a 30-year-old accountant who lives with his family, has been searching unsuccessfully for affordable housing since March with his girlfriend. The couple wants to find an apartment in the New Territories that is sized at about 450 sq ft, with a monthly rent of HK$12,000 to HK$14,000.
“The property market kept rising, and everything is way beyond my budget,” Lau said. “These past few weeks, there has been a decline. Now, if it is within my budget and I find an apartment that fits, I am not going to wait anymore.”
The couple plans to split the rent. Lau’s monthly salary is about HK$24,000, while his girlfriend earns about HK$18,000 a month.
Property sales in October plunged to a 19-month low, with sales down 43.6 per cent year on year after September’s fall of 31.6 per cent. Home prices have dropped 4 per cent since peaking in September. But home values still edged up 6.6 per cent from the start of this year.
With developers moving aggressively to offer better home-financing schemes, Cheung Kong Property managed to sell 80 per cent of the flats it put on sale at Yuccie Square in Yuen Long on Sunday.
However, some potential buyers prefer to stay on the sidelines.
Stephen Qiu, a finance professional who relocated to Hong Kong from Shenzhen five years ago, said he would not buy a property before he got permanent resident status.
“Otherwise, I will need to pay 19.25 per cent more than local people for duties,” he said. “I am aware that developers are offering discounts for promotion. But there is no need to rush, given the housing prices in the city are in a downward cycle.”
Derek Chan, the head of research at Ricacorp, said he expected rent and prices this quarter to fall by up to 8 per cent and 5 per cent, respectively.
Rents would initially drop faster than property prices, and smaller units in areas like the New Territories and Kowloon would face more pressure, he said.
In Sha Tin’s City One, rents and prices have plunged. Last month, the rent for a 304 sq ft apartment fell to HK$10,000 per month, HK$500 below market value. In October, a 478 sq ft flat was rented out for HK$15,000, after a reduction of HK$2,500.
David Ji, the head of China research at Knight Frank, said rents would drop by up to 8 per cent and prices would fall 5 per cent for luxury homes next year. For mass residential units, rents and prices would decline by up to 5 and 10 per cent, respectively.
“I think it’s a positive sign. It’s a negative sign for owners, but on the whole … it gives people a better living standard,” said Edina Wong, the head of residential leasing at Savills.
Additional reporting by Xie Yu