Soaring home prices near peak

Property prices are just 1 percent lower than their peak in July, Financial Secretary Paul Chan Mo-po says.

Stella Wong and Tereza Cai

Tuesday, June 04, 2019

Property prices are just 1 percent lower than their peak in July, Financial Secretary Paul Chan Mo-po says.

In the Legislative Council financial affairs panel yesterday, Chan said average mortgage payments amounted to nearly 70 percent of incomes in April.

He said the rebound in prices was happening because concerns about the US-China trade war eased in the first quarter amid positive news about talks.

Another factor was lower expectations of further increases in US interest rates.

Chan said from January to April, there was an average of 5,400 transactions a month - 82 percent up from an average of about 3,000 in the fourth quarter last year.

Prices rose for four consecutive months, with the April level just 1 percent lower than the historical peak in July.

"Overall private residential prices in April have significantly rebounded by 9 percent since December."

Chan said prices in April soared to a level 126 percent higher than the bubble of 1997. That was a period marked by record transaction numbers and high prices before the Asian financial crisis hit.

"Market information shows that the property market in May would still be active," he said.

In terms of affordability, Chan said the mortgage payment to median income ratio stayed at a high level of 69 percent, which means prices are well above the affordability of the public.

This is much higher than 44 percent - the long-term level over the past 20 years.

Chan said the government has been using various means to raise land supply in the past few years.

Total supply of first-hand private residential units will remain at a high level of 93,000 units in the coming three to four years, according estimates at the end of March.

On average, 18,800 private residential units will be completed annually during 2019 to 2023, 20 percent higher than the figure in the past five years.

Home sales in the secondary market slowed amid the escalating trade war, with some sellers reducing prices.

A 1,576 sellable sq ft house at Uptown in Yuen Long changed hands for HK$13.5 million or HK$8,565 per sq ft, HK$1.3 million lower than its asking price in February. It is estimated that the seller had a loss of HK$1.65 million. He bought it for HK$14.48 million in 2013.

The 35 major real estate firms saw 34 deals last week, down 29.2 percent, hitting a 16-week low since the lunar new year.

They recorded only 198 transactions during the four weeks in May, down 27.2 percent on a monthly basis.

Midland Realty expected the contracts on homes in the secondary market would fall from 5,336 cases in May to 3,500 in June, which reflected that transactions declined significantly in May.

Chan also said Hong Kong's year-on-year economic growth in the first quarter slowed, recording only 0.6 percent growth, a drop from the 1.2 percent growth in the fourth quarter.

Chan said this is within expectations as the global economy faces challenges, including the trade war and Brexit uncertainties.