The prices of homes in Hong Kong fell by 2.4 per cent in December, the city’s Rating and Valuation Department said on Thursday, slower than a drop of 3.2 per cent in November. The decline from a peak in July amounts to 9.2 per cent.
Shih Wing-ching, chairman of Hong Kong-based Centaline Property Agency, said home prices will first rise by 5 per cent to 6 per cent, and then drop by about 10 per cent. “The price at year-end will be lower than that in the beginning of the year.
“Unless the US reduces interest rates, the home market will not be booming,” he added.
The US Federal Reserve kept interest rates unchanged overnight at 2.25 per cent to 2.5 per cent, in line with market expectations. And the interest rate future shows there is a zero per cent chance of an interest-rate increase in March, when the Fed next discusses interest rate increases.
The drop in home prices comes after CLSA, Citibank and JPMorgan – in stark contrast with Centaline’s Shih – recently said these prices will rise by up to 15 per cent from April to December. These financial institutions correctly forecast the current 15 per cent correction in the market.
The correction began in August 2018 after a 28-month rally. Hong Kong, meanwhile, remains the least affordable city in the world to own a flat in.
Shih also said the withdrawal of the tender for the first commercial plot on the runway of Hong Kong’s old airport at Kai Tak stemmed from a “lack of coordination between senior government officials and frontline officials”.
“The government wants home prices to drop, but did not take the initiative to lead on this,” he said. “The Lands Department upheld the high land price policy, in contrast with the idea of cooling home prices.”
Shih said frontline government staff should communicate with senior officials and not keep land prices so high, and added that it was normal to see developers offer low prices amid the ongoing US-China trade war.
Elsewhere, buyers have walked away and forfeited deposits for 36 homes, a 16-month high, in another sign that they expected prices to fall.