Hong Kong property prices now expected to decline according to new REA Group report
Hong Kong property prices are expected to tumble according to the latest survey conducted by REA.
With prices expected to fall, the desire to purchase property has increased, however current prices are still making buying property an unachievable dream for many. In fact, 73% of Hong Kong people would require financial assistance from parents if they were to make a property purchase.
The 2018 H2 Hong Kong Real Estate Market Outlook also showed that the demand for nano flats had fallen sharply (41% down to 13%) compared to the first half of the year, while the Greater Bay Area has become a popular choice for overseas investment.
Ms。 Nerida Conisbee, Chief Economist, REA Group, commented that the findings of the report on the current Hong Kong real estate were significant, especially during times of dramatic property market change。
“What a difference six months makes. In our previous survey, the Hong Kong market was red hot and respondents thought prices would rise by more than 10% in 12 months. What actually happened was vastly different. Prices started dropping around 5% in July on Hong Kong Island, prompting respondents in this survey to suggest that prices had further to fall, estimating a 12% drop over the next year.
“A number of factors have driven the decline and are likely to continue to contribute to falling prices。 The biggest concern is the US-China trade war and the impact that will have on economic growth。 Rising mortgage rates, stock market jitters and potential oversupply are also concerns。
“While declining prices worry a lot of people, they are not always bad news。 Hong Kong is the least affordable city in the world and many are concerned that they would never be able to buy in this market。 Unaffordable prices put pressure on the government to supply housing which is expensive。 Hong Kong also risks losing young people to other countries if they cannot afford to buy。”
Ms。 Kerry Wong, Chief Executive Officer, Greater China Region, REA Group, commented, “Residential prices have tripled since the Global Financial Crisis and the recent decline of prices, though only between 5-10%, has caused some uneasiness within the market。 The announcement of property measures by the government has raised concerns in the market and we are yet to see the impact of these measures when they are implemented。 During this volatile time, the sentiment survey allows us to identify upcoming trends more accurately。
As a multinational digital advertising business specialising in property, through sqaurefoot.com.hk, REA is providing real-time and holistic real estate information and leading market insights to people in Hong Kong. The new squarefoot.com.hk will put us in an advantageous position to empower the general public to acquire more information on the current market situation, enabling informed decision making on property purchases.”
The 2018 H2 Hong Kong Real Estate Market Outlook has been conducted 14 times since it was launched in 2012, surveying the market every six months。 REA Group worked with Nielsen via an online questionnaire (from 12–21 October, 2018) to obtain 1,002 responses from people aged between 18 and 65 years old。
2018 H2 Hong Kong Real Estate Market Outlook key findings
Almost three quarters of respondents would want their parents’ assistance to purchase property
73% of respondents would wish to have parental support on a purchase, with the average amount required to make the property purchase dream a reality HK$1.41 million. 9% of respondents expected their parents to support them with HK$7 million or above.
Three quarters of respondents wished their parents to be responsible for settling the down payment, while they would pay for the mortgage, signalling that saving enough for the down payment was the major factor restricting people from buying property.
Residential prices are expected to drop over the next 12 months
Almost half of the respondents (47%) expect residential prices to drop in the next 12 months。 Despite this, the percentage of respondents who think they will never be able to afford a property in their lifetime remains the same in the 2018 H1 survey at 27%。
18% (16% in 2018 H1) of respondents stated that they have no plan to purchase property in Hong Kong, but 37% still see purchase of a property as their lifelong dream。
Property prices are still way too high, nano flats are out of the spotlight
Driven by exceptionally high prices, many respondents express that the current levels are still far from reasonable。 Respondents indicated that they would only consider purchasing property if residential prices drop by a further 35%。
68% of respondents believe the sharp falls in stock prices in Hong Kong and China will have the greatest impact on prices, while 66% and 64% of respondents, respectively, indicating that a US-China Trade War and increased interest rates from banks are also issues impacting purchase intention。
Apart from these external factors, new policies announced by the HKSAR government are influencing respondents’ decision-making, including the launch of the ‘“48% off” Home Ownership Scheme’ flats (55%) and “Lantau Tomorrow Vision” (47%)。
The survey also found a huge drop in the number of respondents who intend to purchase nano flats, from 41% (2018 H1 survey) down to 13%.
Ms. Kerry Wong, Chief Executive Officer, Greater China Region, REA Group, commented, “The key reason for the huge drop in the intention to purchase nano flats is in part due to the launch of the ‘“48% off” Home Ownership Scheme’ flats.
足彩胜负14场“We found that 39% of respondents would purchase property via this scheme and would not consider a purchase of private residential property. Given that people can afford a bigger flat for the same price as a nano flat, demand for this has dramatically decreased.”
Property dreams shift overseas due to high prices in Hong Kong
14% of respondents are considering purchasing overseas property (including Mainland China), and for different reasons; 32% (28% in 2018 H1) for vacation use, with 25% (22% in 2018 H1) of respondents planning migration.
The top three overseas countries for property purchase are Mainland China (38%), Japan (35%) and Taiwan (19%)。 The top two countries remain unchanged from the 2018 H1 survey, however, Japan saw an increase of 9 percentage points compared to 2018 H1。 Taiwan has risen from fifth to third。
Property in the Greater Bay Area are highly sought after for retirement, investment and vacation
Among respondents who are considering purchasing overseas property, one in two are considering property in the Greater Bay Area.
Almost half of the respondents are interested in properties in the Greater Bay Area for living after retirement (46%), investment (44%) and vacation (27%) purposes。 Another 20% and 15% of respondents are considering moving back to Mainland China for either living or working respectively。
Ms. Kerry Wong, Chief Executive Officer, Greater China Region, REA Group, commented, “Those who intend to invest in property in the Greater Bay Area should clearly understand the role and positioning of each city within the Area, as it is vital to consider future development and potential growth as well as standard risks associated with purchasing property before making a decision.”
Ms. Nerida Conisbee, Chief Economist, REA Group, commented, “The Greater Bay Area has extremely high potential due to the area’s future development. As more businesses take advantage of the enviable location, we would expect to see large growth in the property market. It’s likely the market will rise rapidly in the next decade.”
Respondents prefer to travel around the world instead of buying property
31% of respondents do not intend to purchase property in Hong Kong but instead utilise their wealth in other areas。 Specifically, 62% would rather spend money on travelling around the world, while 43% and 28%, respectively, prefer to invest in the stock market or properties overseas。
One fifth (19%) would start up a business, while some even said they would prefer to consider the purchase of a yacht (2%).
Evan manages communications for the Greater China region of REA Group Asia and joined the team in July 2018。 She loves anything involving fresh air and a little adventure, sailing is one of her favourite sports。View profile for Evan Hung