(13 November 2018, Hong Kong) Hong Kong’s housing market is entering a correction phase with prices forecasted to fall by 15% in 2019, according to JLL’s latest residential market forecast. However, if the current trade tensions between the US and China worsens and the stock market continues to slide, housing prices may drop by as much as 25%.
Housing prices have steadily increased since reaching their nadir during the Global Financial Crisis in early 2009. In the past two months, however, market sentiment has turned sharply, leading to prices starting to fall. The simmering trade war and China’s ongoing efforts to deleverage the economy is affecting business confidence in the private sector and contributed to the Hang Seng Index dropping by over 20% since January; both of which are now starting to weigh on the minds of buyers.
Joseph Tsang, Executive Director at JLL in Hong Kong, said: “All of Hong Kong’s property sectors have become reliant on PRC demand to underpin growth in recent years. A protracted US-China Trade War has the potential to affect Hong Kong’s economy and property market. Combined with a slowing mainland economy, the city’s housing prices will drop 15% by the end of 2019. Hong Kong’s almost 10-year housing market bull-run looks like it is coming to an end.”
Prices of mass residential properties have tripled since the Global Financial Crisis in 2009 and are now 63% higher than their 1997 market peak. But growing uncertainty around the city’s economic outlook has seen prices dip 1.4% over the last two months.
In an effort to cool a red-hot housing market, the Government has announced an array of ‘spicy measures’ aimed since late 2009, including lower loan-to-valuation (LTV) ratios and new and higher tax levies to dampen demand. Whilst these measures have driven property transaction volumes down to historically low levels, they now pose as a significant risk towards a hard land for the housing market.
Tsang said: “With housing prices starting to slide, the Government needs to urgently re-asses some of the cooling measures that it has introduced over the years. Failure to do so will not only exacerbate the price correction but could also have dire consequences for the local economy. We urge the government to remove the Special Stamp Duty (SSD), review the application of the Ad Valorem Stamp Duty (or Double Stamp Duty) and lift LTV ratios,”
“The severity and duration of this market correction will be dictated by the macro-environment, which is something that is beyond the control of our city government. However, the Government will be in a better position to mitigate the growing downside risks in the macro-environment and orchestrate a soft landing for the housing market by addressing the three measures. That would be in the best interest for Hong Kong.”
For further information, visit jll.com.