Home prices hit seven-year low as interest rates continue to bite

Hong Kong private home prices fell for an eighth straight month to a fresh low in nearly seven years, bringing the yearly drop to 6.8 percent for 2023, a second year of decline, as high interest rates and the slowing economy continue to weigh on sentiments.

Residential property prices fell by 1.4 percent in December from a month earlier to the lowest since January 2017, data from the Rating and Valuation Department showed yesterday, though the decline was smaller than the 2 percent contraction in November.

The December index, which stood at 312.1 points, was 21.6 percent lower than the peak in September 2021. And the eight-month fall is the SAR's longest losing streak in 20 years.

Prices of small - and medium-sized flats slipped by 1.4 percent, among which the value of flats under 40 square meters lost 1.1 percent month-on-month in December, while those for homes between 40 and 69.9 sq m slid 1.6 percent. Homes from 70 to 99.9 sq m also saw their value drop by 1.4 percent.

Prices of flats above 100 sq m shrank at a slower pace of 0.5 percent during the month.

In contrast, the rental index climbed by 0.9 percent last month to the highest in four years, official data revealed. It jumped 6.6 percent last year from a year earlier and is predicted to pose another 6 percent growth this year, driven by the demand from inbound talent.

The drop in property prices will be narrower, which may fluctuate within 5 percent, as the US rate hike circle ends and the market expects supportive policies to be introduced in the next budget, said William Kwok Tze-wai, chief manager of sales at CK Asset.

Property agents and consultants have mixed forecasts for this year's performance.

The yearly growth of home prices will rise as much as 8 percent, despite an expected 3 percent fall in the first quarter, said Derek Chan Hoi-chiu, head of research at Ricacorp Properties.

However, Colliers Hong Kong's head of research Kathy Lee Yuen-yan cautions that property prices will continue to fall by up to 10 percent as fierce competition for new flats in the primary market leaves little room for price adjustment, putting additional pressure on secondary markets.

Martin Wong Shiu-kei, director and head of research and consultancy for Greater China at Knight Frank, expects an L-shaped trend in housing markets, decreasing in the first half and stabilizing in the second half, with a potential 5 percent decline for the whole year.

caroline.zheng@singtaonewscorp.com