Hong Kong's used home prices rose at a slower pace in May as escalating trade war deters buyers from big-ticket purchases

By Lam Ka-sing kasing.lam@scmp.com / https://www.scmp.com/business/article/3016445/hong-kongs-may-lived-home-prices-rise-slower-pace-escalating-trade-war?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | July 2, 2019 11:51 AM SGT
Prices of Hong Kong's lived-in homes increased at a slower pace in May, as the escalation of the US-China trade war created uncertainty for the city's business operations and investments, giving buyers a reason to hold back their big ticket purchases.
The index of used homes rose by 1.4 percentage points to a record 396.8, according to data by the Rating and Valuation Department, slowing down from April's increase of 3.2 percentage points.
 
Last month's data could be the start of another turning point in the city's home prices, just as the property bull run regained its pace after a five-month stumble in January. Street protests " involving as many as an estimated 2 million people on June 16 " in opposition to a proposed extradition bill, have further dampened sentiment, prompting analysts to forecast prices to decline by 2 percentage points this month.
"The lagging figure does not fully reflect the impact of the escalating trade war, and the political turmoil of June," said Derek Chan, head of research at Ricacorp Properties. "June is expected to see correction of 1 to 2 percentage points. More homeowners have been cutting their resale prices, which is causing [downward] pressure."
Prices could stabilise in July, and may regain pace in the subsequent two months if the US-China trade dispute is resolved, said Chan, forecasting prices to increase by 3 percentage points in the second half of 2019.
"If the headwinds dissipate, [home prices] can rise step by step in August and September," said Chan. "If the trade war does not [deteriorate], sentiments can improve in the housing market," since the extradition bill is all but sure to be withdrawn, he said.
Not everybody shares that optimism. Hong Kong's property market will remain volatile, with home prices dropping by about 5 per cent in the second half, according to Knight Frank's executive director Thomas Lam.
On May 10, China said that it would raise duties on US$60 billion of US goods from June 1, in retaliation to the US slapping a 25 per cent import tariff on US$200 billion of Chinese products.