Home prices dive to their lowest in nearly four years

Private home prices dropped by 2.1 percent last month from a month earlier to the lowest since January 2019, data from the Rating and Valuation Department showed yesterday.

Rising interest rates and an economic downturn deterred potential homebuyers.

The private home index fell for the fourth month in a row and was down by 9 percent from the historic high recorded in September last year.

The accumulated drop in the first three quarters of the year reached 8.1 percent.

The prices of small and medium-sized flats slipped by 2.1 percent, also down for four consecutive months.

Prices of flats under 40 square meters fell 2.1 percent month-on-month in September, while those for homes between 40 and 69.9 sq m slid 2.2 percent. Homes sized from 70 to 99.9 sq m also saw their prices drop by 1.3 percent. Value of flats above 100 sq m shrank at a slower pace of nearly 0.3 percent but were still 7.3 percent lower than a year ago.

In contrast, the official rental index rose for five successive months, by 0.17 percent last month, as home buyers flinched and turned to rent instead. But the figure was still 2.2 percent lower compared to 12 months earlier and has fallen by 1.3 percent in the first nine months.

The latest price index mainly reflects the market situation from mid-August to early last month, when the number of daily local Covid cases rebounded to above 10,000 and banks raised their caps on mortgages based on the one-month Hong Kong interbank offered rate. This prompted homeowners to offer larger price cuts to clinch a deal, said Derek Chan, head of research at Ricacorp Properties.

Local banks lifted their prime rates for the first time in four years by 0.125 percentage points in the second half of the month, which drove up the mortgage rates further, but the impact was partly offset by the lowering stress testing requirement.

Chan estimated home prices would go down by another 1.5 percent this month and sink by 10.81 percent for the full year, the largest annual decline since 2003 when SARS hit the city.

The one-month Hibor reached 3.08 percent yesterday - the highest in nearly 14 years. Lenders are projected to increase their prime rates by at least 0.25 percentage points after an expected US interest rate rise of 0.75 percentage points next week, meaning mortgage rates will be above 3 percent.

aiden.he@singtaonewscorp.com