Hong Kong housing slump deepens as borrowers in negative equity triple amid coronavirus pandemic

By Lam Ka-sing kasing.lam@scmp.com

/ https://www.scmp.com/business/article/3082042/hong-kong-home-prices-rebound-stimulus-measures-analysts-question-recovery?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3082042 |

May 5, 2020 11:27 AM SGT

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While the number came below market expectation, the industry could see higher count in the current quarter as unemployment increased and economists maintained bleak forecasts for the city's economy.

Coronavirus disrupts Hong Kong's property industry as construction on 90 per cent of projects is delayed

Still, Tso noted that 384 is still way below the 10,949 cases recorded at the height of the financial tsunami in 2008, and 105,697 during the Sars (severe acute respiratory syndrome) outbreak in 2003.

The increase in such cases in the current market downturn is unlikely to reach those historic peaks, he added.

Besides, banks including HSBC will extend their offer of a moratorium on principal repayments for mortgages associated with residential units under the Hong Kong Housing Authority's Subsidised Sale Flats Scheme.

Hong Kong homebuyers shun developers' sales overtures as economic slump deters families from capital commitments

Meanwhile, home prices on the secondary market increased 0.4 per cent on average last month, the Rating and Valuation Department said on Wednesday, the first gain since November.

Prices dropped by a revised 1.5 per cent in February to the lowest in 12 months, according to an index compiled by the department.

"The index is better than expected but did not reflect the real impact of the pandemic and does not mean home price has reversed the downtrend for an uptrend," said Thomas Lam, executive director at Knight Frank. "The correction in property market has not ended."

As coronavirus outbreak, containment measures weigh on sector, Hong Kong home prices record biggest drop in 15 months

Average home prices have slipped 5.4 per cent since they peaked in May last year, before anti-government protests sent the economy into a nosedive. Along with the pandemic fallout, some industry consultants have called for a larger correction in the world's most expensive housing market.

Demand for homes is likely to remain sluggish as the city's unemployment rate rose last month to nearly the highest level in a decade, damping appetite for big-ticket spending.

Financial Secretary Paul Chan on Wednesday trimmed the government's estimate on the Hong Kong's gross domestic product growth to minus 4 to 7 per cent this year because the impact of the pandemic was more serious than expected. It previously forecast a range of 0.5 to negative 1.5 per cent.

Various measures to curb the spread of the deadly Covid-19 disease have continued to disrupt property viewing and are likely to have dampened sentiment in April, according to Ricacorp Properties.

"After mid-March, the return of coronavirus patients from around the world dampened market sentiment again," said Derek Chan, head of research at Ricacorp, who estimated April's index to be down 1 per cent. Just like a short-lived bounce in November, "the trend in these few months will be in like a zigzag pattern."

About 86 per cent of respondents said current property prices in Hong Kong are still too high, according to a survey of 500 Hongkongers in mid-April by housing agency Squarefoot and Nielsen. Some 51 per cent of them expect prices to drop in the coming six months.

"Even though homebuyers could benefit from falling property prices, their purchase decisions and budget could still be altered by various uncertainties such as employment prospects," said Kenneth Kent, general manager of Squarefoot. "Hence, we believe the market is likely to remain under pressure in the short term."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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