More pain for home prices

Aiden He

Private home prices fell for a seventh consecutive month to the lowest in nearly seven years in November, putting them on track for a second year of decline, as sentiments continued to be hammered by high interest rates.

Residential property prices dropped at a slower pace by nearly 2 percent from a month earlier to the lowest since February 2017, according to the Rating and Valuation Department yesterday.

That compared to a contraction of 2.1 percent in October and 2.3 percent in September. On a year-on-year basis the costs of homes slumped by 6.6 percent in November.

Prices have plunged by nearly 5.6 percent in the first 11 months of the year and more than 20 percent from a peak in September 2021.

In November, prices of small and medium-sized flats slipped by 2 percent - down for seven straight months.

Prices of flats under 40 square meters fell 2 percent month-on-month in November as well, the same for homes between 40 and 69.9 sqm.

Homes from 70 to 99.9 sqm also saw prices drop by 1.9 percent.

Values of flats above 100 sqm shrank by 1.9 percent and were 6.2 percent lower from the beginning of 2023.

The downward trend is expected to continue next year, despite the market projecting a narrower drop for December that would potentially bring the annual decline to about 7 percent this year on the back of a 15 percent slide in 2022.

The effects of the "less spicy measures" on prices remained subtle, and second-hand property owners have been forced to lower asking prices to clinch deals as new homes are coming on the market with competitive pricing, said Derek Chan Hoi-chiu, head of research at Ricacorp Properties.

Hong Kong in October halved the stamp duties for nonlocals and those who are not first-time homebuyers and shortened the period sellers needed to pay tax from offloading properties. It also allowed eligible incoming talent to defer the payment of the revised stamp duties totaling 15 percent for their first home.

Although the overall transaction number saw a small rebound after the cuts, prices are forecast to be down by another 1.5 percent this month. That would set the longest monthly losing streak since 2003 when the city was hit by SARS.

The drop in value means owners who borrowed mortgages worth 80 percent of their homes a few years ago might fall into the category of negative equity, or owe more debt than the value of the home.

Official data have shown the number of residential mortgages in negative equity jumped by 233 percent to 11,123 by the end of September.

If prices head south next year the figure will become even bigger. While consensus anticipates three to four US rate cuts starting in mid-2024, market watchers believe local lenders would stay put until the interbank borrowing costs fall, which means the high-interest-rate environment will persist for most of the year.

The mortgage-linked one-month Hong Kong interbank offered rate dipped by five basis points to 5.579 percent yesterday - still well above the mortgage rates of around 4.125 percent.

Some institutions like UBS have projected prices to drop by another 10 percent next year, while local property agencies see a 5 percent rise - should the administration drop all the cooling measures in February.

The rental index rose 0.6 percent in November to the highest in nearly four years. It has risen by more than 6 percent in the first 11 months of the year and is predicted to grow by 5 to 10 percent next year driven by the demand from inbound talent.

aiden.he@singtaonewscorp.com