Prices, sales and rents all expected to decline in Hong Kong

Both property prices and sales are predicted to fall in Hong Kong over the next three to 12 months, with rents cooling too, according to a new analysis.

Overall, buyer demand has dropped across the board, including from residents of mainland China, says the latest residential market survey from the Royal Institution of Chartered Surveyors (RICS).

It also says that sentiment surrounding the housing market has extended its decline and survey respondents reported that home prices have been little changed over the past three months.

Respondents primarily attributed the drop in demand to falling interest from property investors, while demand from owner occupiers was largely unchanged in September from August.

Against this backdrop, expectations for prices and sales contracted sharply. Prices and sales volume expectations, respectively, for the next three months are now firmly rooted in negative territory.

Moreover, both prices and sales volumes are now seen contracting over the next year. The forecasts for prices are now substantially below the three month moving averages for each of New Territories, Kowloon, and Hong Kong Island, and are seen falling 2.2%, 2.7% and 2.7% respectively over the next year.

Although tenant demand remains fairly robust for the rental market, wavering confidence in the sales market appears to be having some effect on the outlook for rents.

Despite what appear to be solid demand supply fundamentals, contributors do not expect headline rents to increase over the next three months. Indeed, one year rental growth is also seen to be muted.

Tighter credit conditions may be a catalyst for the cooling lettings market and respondents reported a modest deterioration in access to credit for the second consecutive month, and this is expected to continue for the next three months.

This comes as some Hong Kong banks have begun to raise prime borrowing rates, and the US Federal Reserve is expected to increase interest rates again in December.