Hong Kong's January home prices advance, take a breather from five-month decline

Hong Kong home prices took a breather in January from a five-month drop, vindicating forecasts by some analysts that transaction values could reverse some of last year's 9.2 per cent decline.
The overall price index of pre-owned homes rose by less than a tenth of a percentage point to 359.5 last month, after having dropped by 9.2 per cent from August to December, according to data by the city's Rating and Valuation Department.
S&P Global Ratings joined analysts from Japanese investment bank Nomura in saying growth in home prices would sustain and amount to 5 per cent this year.
"Pressure from more interest rate hikes in Hong Kong has eased following the US Federal Reserve's lightened position. In addition, Hong Kong's monetary base, a key pillar supporting house prices, has bounced back," said Esther Liu, credit analyst at S&P. "Transaction volume has already shown early signs of recovery, with strong underlying demand."
Local agency Ricacorp Properties said on Thursday the increase in coming months would widen by 0.5-1 per cent.
Thomas Lam, executive director of Knight Frank, however remained cautious, and said it was "still early" to tell whether home prices were recovering.
"Prices [achieved in recent transactions] are not rising a lot despite the surge in transaction volume," said Lam. "Factors like government policies, external economy, US-China trade, Brexit and economic performance of Hong Kong will continue to affect trends in the home market."
Lam reiterated his estimate that the full-year home price would drop 10 per cent, although the index "will rise mildly by 0.5 per cent" in February.
In particular, S&P warned that the market for micro apartments was likely to see the most subdued growth.
It is because of the segment's high growth before the market correction and potential buyers' particular sensitivity to rate hikes under an estimated 72 per cent growth in loans offered by major developers to buyers of micro homes, which suggests a growing risk level.
The halt in home price declines comes earlier than expected by financial companies such as CLSA, Citibank and JPMorgan Chase, which said home prices would rise starting April this year.
Prices for all units edged up across the board, with larger flats having the fastest growth. In particular, homes larger than 1,722 sq ft reported price increases of 1.5 per cent on average, although such properties recorded fewer than 20 transactions for a second consecutive month.
Apartments measuring between 431 sq ft and 752 sq ft reported the smallest growth, at 0.03 per cent. Among apartments of less than 431 sq ft, those in the New Territories reported price increases of 3.4 per cent to HK$5.39 million (US$686,659) on average, while those on Hong Kong Island became 7.7 per cent cheaper to an average of HK$6.41 million.
The city's rental index dropped by 0.7 per cent in January, declining for a third month, for a combined 2.7 per cent.
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