Hong Kong home prices slip again, security law may keep the lid on market recovery, analysts say

Hong Kong homes prices dipped in April, with analysts predicting the market to come under renewed pressure from Beijing's controversial plan to impose a security law tailor-made for the recession-hit city.

The index for used homes fell 0.13 per cent, according to data released by the Rating and Valuation Department on Friday. This reversed a 0.7 per cent gain in March. The gauge has now retreated 5.3 per cent from the peak in May last year.

Cracks in Hong Kong's housing market could widen in the coming weeks after China endorsed the proposed law that roiled the city's property and stock markets. President Donald Trump is preparing to unveil new policies on China, after his administration this week determined Hong Kong has lost its autonomy from China.

"It is uncertain now. The market is volatile," said Derek Chan, head of research at Ricacorp Properties. "If buying confidence is again dampened by the impact on economy after the security legislation and US actions, home prices may come under pressure."

More than 360 people were arrested this week in street protests against the national security plan, stoking concerns more unrest will grip the city.

That latest upheaval could chip away at tentative signs of revival in the world's least affordable housing market even as the government unveiled a record expansionary budget to revive the economy.

Property developers have put nine projects out on the market so far this month, compared with only three in April, as social distancing measures were relaxed amid success in controlling the viral outbreak.

In the market for new homes, sales have revived in recent weeks. China Vanke sold all 188 flats at The Campton development in Cheung Sha Wan earlier this week. Emperor International sold about half of its 68 flats on offer.

Home prices are likely to retrace by 10 per cent this year, said Billy Mak, associate professor at the department of finance and decision sciences at Baptist University in Hong Kong.

"After all, the economy is under pressure," Mak said. "If home prices are positively correlated to the economy, they are likely to slowly adjust downwards. The adjustment does not mean the market is falling off a cliff, he added.

Goldman Sachs forecast home prices to decline 25 per cent from mid-2019 to trough if the economic impact of Covid-19 stretches into the third quarter and social disruption escalates. The city's economy is officially forecast to shrink by 4 to 7 per cent this year, due to the twin blow of public health and political crises.

Mak also noted some Hongkongers seeking to emigrate tended to cash in and sell properties more cheaply as political tensions throttle the economy. If the number of such sellers increases, home prices are likely to suffer, he added.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.