Trade tensions and rising interest rates put the brakes on sprialling property prices

HONG KONG, CHINA -- 24 September 2018 - Housing prices across Hong Kong are expected to fall over the next three months, following two years of continuous growth, according to the newly published RICS Hong Kong Residential Market Survey.

Anxiety over US-China trade tensions, predicted interest rate hikes and concerns over already elevated property prices are now expected to stifle growth, as respondents reported the first dip in buyer demand in two years.

Published monthly by RICS (Royal Institute of Chartered Surveyors), the Hong Kong Residential Market Survey provides valuable insights into professional sentiment in the city's residential sales and letting markets, by aggregating the reports of experts in the field.

Respondents to the most recent survey reported a "considerable" slowdown in property inflation in August. The data shows that buyer enquiries from both investors and owner occupiers fell throughout the calendar month.  

This cool down was particularly acute in Kowloon and Hong Kong Island, where a balance of more than one in five contributors reported fewer enquiries from new buyers. A balance of 18 percent of respondents reported that enquiries from Mainland Chinese buyers declined across Hong Kong.

In addition to concerns over the effects of a US-China trade war and already elevated home prices, higher interest rates are also expected to put pressure on homebuyers. A net balance of 10 per cent of respondents reported that it was tougher to access credit in August, and this is expected to continue for the next three months as the US Federal Reserve continues to increase interest rates.

Meanwhile rental rates are still expected to increase over both the next three to twelve months, though at a much more modest pace than previously expected.

"Chartered surveyors in Hong Kong indicated a fairly dramatic shift in sentiment surrounding the housing market in Hong Kong in August," said the report's author Sean Ellison, RICS Senior Economist for Asia-Pacific. "Given the broad-based nature of this pullback, as well as the presence of several factors -- trade wars, higher borrowing costs, dear valuations -- rather than a single catalyst, these results may not point to a transitory phenomenon."

Home prices are expected to fall a nominal 0.2 per cent over the next 12 months across all of Hong Kong, though this figure disguises some regional dispersion. Prices on Hong Kong Island are expected to fall 0.9 per cent over the next year, whilist dropping 0.3 per cent in the New Territories. Meanwhile, home prices in Kowloon are still expected to increase 0.5 per cent over the same period

The RICS Hong Kong Residential Property Monitor is a monthly sentiment index tracking trends in the commercial property market. It is a leading indicator for global investment and occupier markets. The full report is available at www.rics.org/economics. (mor/*).