Hong Kong’s residential market is not out of the woods yet with the mass-residential market expected to be flat or drop 5 percent next year, and the luxury sector to plummet 5 to 10 percent in the same period, global real estate advisory firm Jones Lang LaSalle Hong Kong said on Thursday.
“If the Hong Kong government cannot effectively curb the spread of the coronavirus, unemployment could spread from the grassroots segment to the middle-class job positions. If this really happens, local home prices could plummet more than 10 percent, and home transactions would shift from the secondary market to the primary market,” JLL Hong Kong Chairman Joseph Tsang warned in a news conference.
The prospect of scarce supply and the lower interest rate will likely continue to boost the housing market in the near term
Carie Li,
OCBC Wing Hang Economist
Buoyed by tight residential flat supply and ultralow interest rate environment, Hong Kong home prices edged up 0.44 percent in the first 10 months of this year even though the city’s economy slipped into recession due to the pandemic outbreak. The home price index, as tracked by the Rating and Valuation Department’s private domestic price index stood at 380.9 in October, compared to 379.2 in December 2019.
OCBC Wing Hang Economist Carie Li agrees, saying the prospect of scarce supply and the lower interest rate will likely continue to boost the housing market in the near term.
Jonas Kan, an analyst at Daiwa Capital Markets, said, “At this stage, we do not expect the government to loosen its policies on the residential property sector, given the sensitivity of the issue. However, we believe that if there are further changes in government policy relating to property, the bias would be towards loosening.”
The government abolished the Doubled Ad Valorem Stamp Duty on the non-residential sector on Nov 26 in a bid to spur transaction activities in this property segment. However, real estate analysts cautioned that the upside may be limited amid dire business conditions, pandemic uncertainty, flexible work arrangement and the prevalence of online shopping.
The administration, however, still insists the tightening measures for the residential sector will not be eased as the home market remains resilient.
Colliers International’s Deputy Managing Director of Capital Markets and Investment Services Antonio Wu adds: “The rise and upward trend of the renminbi, low-interest rate market, high market liquidity and recent removal of the double stamp duty creates a strong platform for local real estate investors, hinting that the market is primed for recovery and will remain competitive in 2021.”
