Real estate services provider Cushman & Wakefield is predicting that Hong Kong’s housing prices will remain stable in the short term.
However, interest rate rises, geopolitical uncertainty as well as the vacancy tax imposed by the government may pose major challenges for the city’s property market in future.
According to data compiled by Cushman & Wakefield, the number of commercial and residential sales and purchase agreements began to decline in the third quarter. The figures were 8,796 for July and 6,966 for August - after hitting a year-to-date high of 9,520 in June.
Sales volume will drop further in September and should stay at 5,500 S and Ps (sales and purchase agreements) average per month for the fourth quarter
Alva To, Vice-president and head of consulting for Greater China, Cushman & Wakefield
“Sales volume will drop further in September and should stay at 5,500 S and Ps (sales and purchase agreements) average per month for the fourth quarter,” Alva To, vice-president and head of consulting for Greater China at Cushman & Wakefield, told reporters on Thursday.
To said current trade disputes between China and the United States would impact most on Hong Kong’s trading and logistics industry, which comprises 22 percent of the city’s total gross domestic product and 19 percent of its total employment.
“However, we may see a price correction in 2019 if current trade tensions escalate into a full-blown trade war, given the strong economic ties between Hong Kong and the mainland,’’ To said.
“The slowdown in the mainland economy will dampen purchase sentiment and affect local home prices. These could drop as much as 10 percent - a range that depends very much on how the trade war pans out,” he added.
Cushman & Wakefield also produced a property market study to assess the impact of interest rates on housing prices. They concluded that if the government lifts interest rates twice - as the market estimates - buyers will be affected due to higher mortgage rates.
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Breaking down the year-to-date residential sales, primary sales accounted for nearly 30 percent, while the secondary market accounted for more than 70 percent, statistics from Cushman & Wakefield showed.
Earlier this year, the government levied vacancy rates to part of the first-hand vacant departments.
To said this was unable to provide enough housing supply - so its impact was very limited. To said the current economic situation, rather than government curbs, will have the most impact on the real estate sector.
The estimated average annual housing supply level now stands at 19,250 units - similar with that of the first 10 years of this century. This follows a period of very low levels from 2008 to 2017 - at around 11,700 units.
“All three factors intensify realty market uncertainty,” said Tom Ko, executive director of capital markets at Cushman & Wakefield Hong Kong. This could lead to a “potential trading slump”, he added.
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