Home prices continue to slide as rents shoot up for sixth month

Home prices fell at their fastest pace this year to a six-month low in July and analysts warned the downward trend may persist for the rest of 2023.

Rents, however, rose for a sixth straight month.

The private domestic price index fell by 1.1 percent monthly to 343.4 points in July, data from the Rating and Valuation Department showed.

It was the third consecutive monthly decline and the biggest so far this year.

For small to medium-sized units - those less than 100 square meters - the index was recorded at 345 points, indicating a monthly decline of 1.12 percent. For large-sized units - more than 100 sqm - the index stood at 302.8 points, reflecting a monthly decrease of 0.56 percent.

The most significant decline was observed in the Class E Unit -160 sqm or above - which dropped by about 1.89 percent. The number of transactions for units in this class was below 20.

Knight Frank director Martin Wong Shiu-kei said the home price index has experienced a combined decline of 3 percent from May to July. Factors such as high interest rates, insufficient purchasing power and a surplus of unsold units at new developments contributed to the decline.

Wong added that developers are likely to intensify their price-reduction efforts in the second half which could see prices decline by up to 10 percent.

Meanwhile, Ricacorp Properties indicated that the recent launch of new properties at low prices has dragged the overall property market performance. The decline in home prices for this quarter might expand to 2.6 percent.

But the fourth quarter has the potential to become a turning point. There is anticipation that the policy address in October might introduce relaxed measures in response to current market conditions.

The rental index has continued to rise for the sixth consecutive month, with a monthly increase of 1.05 percent in July.

Midland Realty said the rental market is being upheld by immigrants attracted by talent schemes, coupled with the rise in mainland students following the reopening.

The agency estimated that rental prices will outpace home prices, with a robust increase of 8 to 10 percent for the whole year - which would be the highest growth in 11 years.

The rental market is also expected to positively impact the buying market, as a growing number of investors seek to purchase properties for rental income yields.

Furthermore, there is an anticipation that some mainlanders will opt to transition from renting to purchasing homes within a span of three years after settling down.