Hong Kong property sales to rise 10 per cent in Year of the Rat as investors shrug off impact of Wuhan virus, social unrest

By Georgina Lee

/ SCMP |

February 4, 2020 4:15 PM SGT

A rebound in the second quarter is likely to lift overall property sales in Hong Kong 10 per cent higher in the Year of the Rat despite uncertainties such as the deadly Wuhan virus outbreak and intermittent protests, according to Ricacorp Properties.

The property agency expects transactions of flats, commercial and industrial units to rise to 79,300 from around 72,100, a second straight year of declining volumes in the just-concluded Year of the Pig. The volumes were also the lowest in the past four years and third lowest historically. Ricacorp, however, did not provide a breakdown for home sales.

Growth this year will be driven primarily by the secondary market, Derek Chan Hoi-chui, head of research at Ricacorp, said in a note. He added the ongoing Wuhan coronavirus epidemic, which has claimed more than 100 lives on the mainland and the number of reported cases in Hong Kong rising, was unlikely to weigh on the city's property market over the long term.

"The property market rose during the early part of the Year of the Pig, but [later] weakened to the social unrest and the US-China trade war," Chan said, adding that both factors have largely disappeared, which could result in a spate of property transactions after these negative factors have run their course in the first quarter.

Earlier this month, the US and China signed a "phase one" deal, signalling a truce in an 18-month trade war between the world's two largest economies. Meanwhile, the intensity of protests against the now-withdrawn extradition bill has largely reduced, with hardly any large scale demonstrations since the violence peaked in November.

For the Year of the Pig, which ended on January 24, Ricacorp expects overall volumes to reach 72,100 amounting to HK$646 billion (US$83 billion), a decline of 2 per cent and 10 per cent, respectively, compared to the Year of the Dog a year earlier.

Pedestrians wearing masks are seen at Causeway Bay in Hong Kong as they take precaution against the deadly Wuhan virus outbreak. Ricacorp Properties does not expect a huge impact on the city's real estate market from the epidemic. Photo: Dickson Lee

Between February 5 last year to January 22 this month, 71,717 deals totalling $642.7 billion were recorded, according to data from the Land Registry. Unlike this year, the last Lunar New Year started in February.

Of these, new home sales accounted for 20,525 transactions or 29 per cent of the total, up 18 per cent from the Year of the Dog, but value fell 12 per cent to HK$205.4 billion. However, transaction volumes in the secondary market plunged during the second half of 2019 primarily on the back of the unrelenting protests, which started in June.

But this year, secondary home sales will pick up, thanks to the current low interest rate environment and the Hong Kong government's move to raise the mortgage cap to stimulate home sales, Chan said. In October, the government had raised the mortgage cap to 90 per cent from 60 per cent previously for homes valued at up to HK$8 million. For flats valued at up to HK$10 million the cap was raised to 80 per cent from 50 per cent.

During the Sars (severe acute respiratory syndrome) epidemic in 2003, a total of 80,833 transactions totalling HK$$172.8 billion were recorded, an increase of 7.3 per cent and 6.8 per cent, respectively. The epidemic afflicted 8,098 people in 37 countries and killed 299 in Hong Kong, sinking retail sales and caused the city's economic to shrink by 0.5 per cent in the second quarter.

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.

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