Hong Kong's January lived-in home prices rise, reversing three months of decline as property buyers return to the market

By Sandy Li sandy.li@scmp.com

/ https://www.scmp.com/business/article/3122915/hong-kongs-january-lived-home-prices-rise-reversing-three-months-declines?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3122915 |

February 25, 2021 11:07 AM SGT

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Prices of lived-in homes rose last month in Hong Kong, ending three straight months of decline, as buyers were encouraged by the city's tapering coronavirus caseload to return to the property market, confident that the local economy would bounce back from its recession.

The price index for lived-in property rose by 0.13 per cent to 380 in January, the first monthly increase since September, according to data provided by the Rating and Valuation Department. The index was still down by 16.9 percentage points, or by 4.3 per cent, from the record high of May 2019.

"More property buyers revived their buying interest last month after seeing the number of daily new infections fall to double digits," said Derek Chan, head of research at Ricacorp Properties. "It helps to stabilise home prices."

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The pickup in second-hand home prices, although a lagging indicator, points to a more positive outlook for the world's most expensive real estate market, as developers grapple with how and when to offload 31,000 new homes - nearly 80 per cent more than the annual take-up rate in the past five years - in the coming months. Chinachem Group, the first developer to kick off a new property sales launch in the Year of the Ox, managed to find buyers for just three of its 52 Mount Anderson flats in Kwun Tong yesterday, which underscores the market's trepidation.

The expected deluge of new homes is spoiling buyers with available choices, causing them to be more selective in their commitments, Chan said.

A family in the city would need to save up for 20.7 years to afford a home, according to the annual Demographia International Housing Affordability Study in 2021, which ranks 92 major markets across the world based on median affordability scores. That has changed slightly better than 20.8 years in 2020 and 20.9 years in 2019.

The Anderson Road quarry site in Kwun Tong on June 4, 2019. Photo: Martin Chan alt=The Anderson Road quarry site in Kwun Tong on June 4, 2019. Photo: Martin Chan

Smaller flats - which qualify for more mortgage financing because of their lower price points - appeared to be more popular among buyers, with the price index rising 1.2 per cent last month from December, while the index for apartments larger than 100 square metres (1,076.4 square feet) eased by 0.2 per cent, according to the data.

"Any revival at the top end of the residential market will depend on the timing and extend of border reopening, in particular with mainland China," said Savills' senior director of research and consultancy Simon Smith, adding that prices may decline by between 5 per cent and 10 per cent this year in the luxury segment. "With the timing of the border opening still uncertain, the first batch of property buyers to re-enter the market are likely to be bargain hunters looking for discounted assets."

The large number of new residential property expected to flood Hong Kong's housing market in the coming months, could "test the market," Smith said.

Buyers line up for Skypoint Royale developed by Hong Kong Ferry (Holdings) in the sales office at Mira Place One, Tsim Sha Tsui on February 20, 2021. Photo: Dickson Lee alt=Buyers line up for Skypoint Royale developed by Hong Kong Ferry (Holdings) in the sales office at Mira Place One, Tsim Sha Tsui on February 20, 2021. Photo: Dickson Lee

The market for newly launched homes have done well, with developers such as Nan Fung Group reporting brisk sales during the first three weekends of 2021. Nan Fung and its partner MTR Corporation when its February 6 sale of LP10 at the Lohas Park in Tseung Kwan O was 80 per cent sold.

Mount Anderson, located at a former quarry in east Kowloon, has no direct access to public transport, with the nearest subway station at Ngau Tau Kok more than an hour away on foot. The average price of HK$20,363 per square foot meant that the starting price for a 377 square foot (35 square metre) unit was HK$7.92 million (US$1.02 million).

"Home prices used to rise after the Lunar New Year, traditionally the boom in the residential market," said Ricacorp's Chan, who expects the second-hand home index to rise by 1 per cent in February. "This year, we see potential buyers bringing forward their home purchases."

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 © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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