18 November 2018
Average new home price in Hong Kong has hit a record high at above HK$13 million. Photo: Xinhua
Average new home price in Hong Kong has hit a record high at above HK$13 million. Photo: Xinhua

Hong Kong housing market set for consolidation

Various figures show that housing prices in Hong Kong continued to scale new heights in the recent past. New-home market has been red-hot, and starter-homes in New Territories, in particular, led the price gain.

The home price index in New Territories is up around 12 percent in year to date, according to the Centa-City Leading Index.

That compares with the city’s overall home price increase of 10.77 percent, 8.85 percent rise in Hong Kong Island and 11.16 percent in Kowloon.

Data suggests that starter-homes or flats with small ticket size are sought-after.

New housing sales continue to be robust. The city’s new home sales by value reached HK$133.36 billion this year as of June, which represents over 70 percent of the full-year value of 2016.

And the average transaction size has hit a record high, at above HK$13 million. Given the trends, the full-year data is set to set a new record this year.

However, some indicators have shown sign that the housing boom may soon be out of steam.

The proportion of properties in the 118 main housing estates in Hong Kong that is above the 10-week averages in terms of price, has tumbled to 58.6 percent currently from around 90 percent.

Historical data shows that housing price would reverse the uptrend when this ratio drops below 40 percent. The correction may take place as early as end of November this year.

New-home sales have dominated the market and absorbed a significant amount of purchasing power. Housing price usually would ease or decline afterwards.

Historical data shows that when the 12-month new home sales volume has rallied more than 50 percent or even 100 percent and the sales value jumped 90 percent or even 150 percent year-on-year, housing prices usually cool off within a couple of months.

The 12-month new-home sales volume already surged 53 percent as of June, and sales value soared 75 percent from the year before. Therefore, home prices are likely to fall off in the third or fourth quarter.

Nevertheless, any correction may be brief and limited, unless the market liquidity situation shows dramatic shifts.

This article appeared in the Hong Kong Economic Journal on Aug 10

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal chief economist and strategist

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