Hong Kong’s home rents rose for the fourth consecutive month in June with an influx of non-local students and professionals pushing up demand, while prices of the city’s private housing dropped to a nearly eight-year low.

The rental index rose 0.2 percent to a 4.5-year high of 189 in June compared with a month earlier, though the pace of increase has moderated from the 1.1-percent jump seen in May, according to data released by the Rating and Valuation Department on Monday.

The Hong Kong Special Administrative Region government’s efforts to draw in talent have supported the rental market, said Kathy Lee, head of research at professional services company Colliers International. With the arrival of more non-local students in the city during the summer vacation, she said the company expects the rental growth to persist as demand remains robust.

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Martin Wong, head of research and consultancy for Greater China at property consultancy Knight Frank, agreed, forecasting that rents will rise 5 to 8 percent this year. Wong noted that smaller residential units will see higher rent growth compared to luxury ones.

Data from the Hong Kong SAR government shows that since the end of 2022, close to 200,000 applications under various talent attraction programs have been approved, with 130,000 professionals already making their home in the city.

On the sales side, Hong Kong’s home price index declined by 1.2 percent on a monthly basis to 301.8 in June as slower economic growth coupled with high interest rate softened people’s desire to buy homes. The figure marked the lowest level since October 2016, which reported 304.3.

Price drops were recorded across all apartment sizes, with units under 100 square meters showing a nearly 1.3-percent monthly drop to 303 points. Larger homes saw a 0.5 percent monthly decrease to 277.5 points.

Derek Chan, head of research at Ricacorp Properties, said prices of occupied homes in Hong Kong were dragged down by the low sales price of new residential projects.

The price decline has wiped out all the increases recorded in March and April combined, which were driven by the scrapping of property cooling measures announced by Financial Secretary Paul Chan Mo-po in his 2024-25 Budget in February, he said.

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As property developers continue to adopt a low-price strategy in new home sales, the city’s property market is expected to face further pressure in the third quarter, with prices expected to drop further by 2 percent, Derek Chan said.

The situation could stabilize in the fourth quarter if the interest rate cut is realized, in which case the city’s home prices could fall by around 5 percent for the whole year, he added. Otherwise, the city could expect a larger price drop.

Wong said he believes factors like high-interest rates will continue to weigh on home prices, and maintains his forecast of a 5-percent decline in home prices for the whole year, citing expectations that Hong Kong banks’ rate cuts will lag those of the US Federal Reserve.

Contact the writers at irisli@chinadailyhk.com