Hong Kong home prices have bottomed out and are likely to rise between 5 and 10 per cent from this month up to the end of the year, as the Covid-19 outbreak in the city comes under control and economic activity picks up in its wake, according to Citi.
"Home price should resume an uptrend once concerns on Covid-19 are gone," Citi's property analyst Ken Yeung wrote in a research note on Monday. "We generally expect below-average transaction volume will continue to accumulate pent-up demand in the market, which has started to unleash recently as concerns on [the] virus outbreak have dissipated."
It is the first major bank to forecast an upswing in Hong Kong's property prices that have been held down by weakening sentiment resulting from an economy battered by months of anti-government protests and the coronavirus pandemic.
Due to memories of the severe acute respiratory syndrome outbreak in 2003 and the 2008 global credit crisis as well as the subsequent rebound in local home prices, many potential buyers are likely to appear as interest rates are expected to stay low for a while with a further boost from quantitative easing, according to Citi.
On Tuesday, data from the Land Registry for April showed sentiment was improving. 4,866 property transactions, comprising homes, offices and car parking spaces, totalling HK$38.4 billion were sealed last month, with both volume and value up nearly 7 per cent from March. Both figures were also the highest in five months.
"Hong Kong's housing market has shown it is virus-proof as prices only declined 1 per cent in the first three months when the Covid-19 almost paralysed everything across the world," said Derek Chan, head of research at Ricacorp Properties. "Demand was just deferred, it did not disappear. We've seen more homebuyers starting to flock to the market."
Sales of new homes too have gathered pace recently. Buyers picked up 30 units across 10 major projects in the city last weekend, compared to 19 in the previous weekend.
Chinachem Group sold three villas in eight days for a combined HK$287.2 million at its Villa Cove luxury housing estate in Clear Water Bay, one the city's most prestigious neighbourhoods.
Ricacorp expects home price to increase by 5 per cent in the next three months as buyers unleash pent-up demand and city gets back to business after the government eases curbs imposed to bring the coronavirus under control.
Most Hong Kong venues shut because of the Covid-19 pandemic will be allowed to reopen from Friday, the government announced on Tuesday as the city saw no new cases for the 10th time in the past 16 days.
However, some market observers believe the correction will continue as Hong Kong's economy remains mired in a recession. The city posted its worst quarterly figures ever, sinking 8.9 per cent in the first three months of the year. On Tuesday, Hong Kong's retail sales in the first quarter fell 36.9 per cent year on year, a historic low, as the Covid-19 crisis and the ranks of jobless people and uncertain outlook continued to dampen consumer sentiment.
"No matter how much you need a home and how cheap it is, you will not buy it if you are not confident about your income and job security," said CGS-CIMB Securities analyst Raymond Cheng. "It is hard to be optimistic at this moment."
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