This article is from the Australian Property Journal archive
CONFIDENCE in the Hong Kong residential market improved, although remain in negative territory, after strict lending conditions were loosened in October.
The October 2019 RICS-Spacious Hong Kong Residential Market Survey indicated some signs of stabilisation in the market with the Confidence Index rising from -78 in September to -20 in October. Although a negative reading continues to indicate a deterioration in market confidence, the rate of deterioration has slowed considerably.
RICS attributed the improved confidence to the Hong Kong Mortgage Corporation relaxing the loan-to-value (LTV) ratio restrictions.
Under the changes made in October, mortgages can now carry a LTV ratio of 80% on properties worth up to HK$10 million and 90% on properties worth up to HK$8 million which were previously capped at HK$6 million and HK$4 million, respectively.
Respondents said these measures are providing some short term relief for the market with demand stabilising during October.
“After reporting a decline in buyer demand for three consecutive months, respondents noted that buyer demand was little changed from September. The exception was demand from mainland Chinese buyers, which was said to have continued to decline,” the survey said.
Meanwhile, contributors noted that demand from investors continued to increase at a similar rate to what it has during the past several months. Although that aggregate demand from owner occupiers changed very little, it was an improvement over the previous three months where demand was said to have declined. Demand from owner occupiers also increased in the New Territories, which is where the largest stock of homes that would qualify for the revised LTV ratios are likely to be located.
Prices are expected to contract over the next three months, though in net balance terms at a substantially slower rate than what was expected in September. Similarly, home prices are only expected to fall 1.6% over the next 12 months vs in September when respondents expected prices to fall more than 5%.
But price expectations were more disperse than they have been in recent months. Respondents were split as to whether there prices would modestly increase or decrease over the next 12 months. Slightly over half of respondents (53%) expect prices to decline to some degree over the next year. Survey participants reported a similar level of dispersion in prices over the past three months, with 16% of respondents saying that aggregate prices rose 0-2% over the past three months in their region.
Despite the improvement in conditions, respondents remained cautious on the longer term outlook.
Headline prices are only expected to increase just 2.9% a year for the next 2-5 years, largely unchanged from the 2.6% expected in the September survey.
RICS said this could indicate that respondents see the improvement in market conditions being transitory, as the easing of LTV ratio requirements allowed for the release of pent-up demand from potential homebuyers, but may not signal an outright revival in the housing market.
