An imminent interest rate rise, increasing land supply and a deteriorating economy is reducing the appeal of Hong Kong property investment.
- Appetite for Hong Kong property is at its lowest level in almost two years
- Investors, who have previously enjoyed some of the world’s highest sustained capital appreciation, believe the market could be in for a bumpy price correction
- Regional investors are already looking to safehaven property markets such as the UK to provide the security they need
Hong Kong property sales have crashed to a 19-month low.
Transactions in October were 31.6% down on September’s figures and 43.63% down on 2014’s figures.
The number of sales last month totalled 4,491, following a modest recovery in September, in which volumes rose 5.2% month on month.
Analysts predict volumes could slump further, especially as the government said it will continue to increase the supply of land in the Special Administrative Region to an 11-year high, while the Transport and Housing Bureau recently explained 86,000 new flats will be completed by 2019.
Hong Kong property has recorded some of the highest sustained capital growth in the world over the past two years, but the drop in sales could be indicative of a subdued investor appetite. An increasing number of analysts expect property values in Hong Kong home will fall from the start of next year, with some predicting the decline could be as high as 30% over the course of the next 12 months.
According to Barclays, property prices have dropped 2.7% against their mid-September peak, but the market is only just beginning to get to grips with an imminent interest rate rise, land supply increases and a regional economy that continues to deteriorate.
“Should home prices continue to fall in the coming weeks, this could tip the home owners’ and home buyers’ sentiment mindset into bearish territory and potentially speed up the pace of the physical market’s correction,” Barclays latest research report stated.
Many investors in the region are now choosing to invest elsewhere, fortifying their portfolios with safehaven assets, such as property in the UK.