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The decline in the prices of buildings in hong kong has further widened. On 28 november, the hong kong disparities industry valuation authority published the latest building price index, offering 352. 4 points in october and a further 2. 41 per cent per month, which is the largest decline in a single month in four years after november 2018。
The latest building price index is close to 352. 7 points in december 2017, returning to five years ago. Prior to this, the hong kong housing price index fell by five months。
Compared with the historical high of 398. 1 points last september, the price of the building has fallen by approximately 11. 48 per cent for 13 months, the longest decline since the sars period around 2003。
For the last two months of this year, based on various factors, the increase in the united states dollar, the recurrence of the epidemic, and the increase in interest rates, the research institutions believe that the price of the building will continue to fall, with a projected fall of 15 per cent throughout the year。
“the relatively large fall in the hong kong building is related to two core causes. The first is the fact that housing prices in hong kong have been rising for too long, and have been in the middle of an upward spiral for the past five or six years, with a very high cumulative increase. The second is the rapid and repeated increase in interest rates in the united states and the continuous exchange rate between the hong kong currency and the united states dollar, which will lead to a reduction in liquidity and a gain on investment in real estate.” dan hoji, an expert in real estate market research, told the interface journalists。
It's expected to drop by 15% throughout the year
As one of the highest housing prices in the world, when hong kong is hit by economic downturns, rising interest rates and emigration, the price of the building is also caught up in nails。
In the first october of this year, the differential price index has been down 10. 54 per cent. In addition, the rent index fell by 1. 75 per cent。
The decline in the price of the building was accelerated, mainly by small and medium-sized units. In the previous october, both small and medium-sized units had fallen by more than 10 per cent。
Of these, the latest report for small units of less than 431 square feet was 388. 9 points, a decline of approximately 10. 58 per cent in the first 10 months, or 2. 41 per cent per month, and for small and medium units of 431-753 square feet, a decrease of 11. 07 per cent, or 2. 64 per cent per month。
The leading urban lead index in china, reflecting the urban dynamics of the major large used residential buildings, fell by six weeks, the latest being 159. 76 points, a five-year low. This represents a 16. 5 per cent decline compared to the historical height of 191. 34 in august 2021。
Since the beginning of the year, after falling 3. 2 per cent in the first quarter, hong kong housing prices rose slightly by 0. 2 per cent in the second quarter. Since the third quarter, however, the residential property market has become softer as bank interest rates have increased and the construction of buildings has increased。
Source: biennial report on monetary and financial stability
The semi-annual report on monetary and financial stability issued by the hong kong monetary authority in september (hereinafter referred to as “the report”) states that delays in hong kong's epidemic, combined with rising mortgage rates, may discourage demand in the market and that market concerns about the global economic outlook and uncertainty about the pace of interest rate hikes in the united states will continue to slow down the urban climate。
It should be noted that the october index mainly reflects the urban situation from mid-september to early october. Since september, the united states has continued to increase significantly, while hong kong has, for the first time in four years, increased its interest rate by 12. 5 basis points, formally marking the beginning of the local hike。
This was also a key factor in the increase in the fall in building prices in october. According to china's real estate data, in the first 9 days of october, only 20 transactions were registered in hong kong's 10 houses, 83 per cent less than 116 in the same period in august 2003 and 85 per cent less than 130 in the same period in december 2008. This means that the city is currently less active than during sars and the financial tsunami。
At present, there is no news of the market for good buildings. As at 27 november, there were only over 210 new market deals in hong kong, a decrease of about 19 per cent compared to the same period last month。
On the one hand, there have been recurrent outbreaks in the interior, slowing the clearance process in the interior of hong kong. On the other hand, the united states has again significantly increased interest rates, and on 3 november the fed announced an additional 75 basis points。
The hong kong currency's monetary policy was closely linked to the united states dollar, resulting in an additional 25 basis points of interest at hong kong interbank rates, further affecting the city。
“the current level of housing rental income in hong kong is about 2 per cent, and the interest rate on bank deposits is higher than the rate of return on housing rents, forcing some of the funds to leave the market and transfer to bank deposits.” deng hoshi indicated。
He mentioned that, according to current trends, the dollar would continue to increase and hong kong currency would follow suit, and the gap between the annualized rate of return on hong kong currency deposits and housing rents would widen further, thereby changing market investment expectations。
Source: semi-annual report on monetary and financial stability
In response to the next performance, chen yongjie, president of the ministry of housing of china, stated that the index was expected to decline further in november, owing to stock market fluctuations and continued interest rate hikes in the united states, and that it was expected to fall even further, or even further than in october. The annual price index is expected to drop by 15 per cent, more than 17 per cent compared to last year's high。
The director of lai fong and the head of the research and consulting department of the greater china region also noted that the market was not well-informed and was affected by rapid shifts in local and global economic prospects. Official performance is expected to continue to bottom in the short term, with an increase of 15 per cent in the official price index decline throughout the year, and prices and turnover in the first quarter of next year will remain low。
The hong kong government has no plans to adjust the city policy
The hong kong interbank interest rate (hibor), which is related to the supply building, has continued to rise, reaching a new high of 4. 38 cents as of 29 november。
Based on the current rapid increase in hibor interest rates, the investment bank goldman sachs predicts that hong kong housing prices will fall by 30 per cent by 2023。
Although real estate enterprises have expressed a desire for the government to stimulate the city by “spictification” (release of the housing policy), the port authorities have indicated that there are no plans to adjust the city's measures。
According to chen mobo, director of finance of the hong kong special administrative region, the united states interest rate has put pressure on the hong kong building market, but the need for a “tow town” is not recognized and the government has no plans to liberalize hong kong's real estate policy。
In response to the “sliding down” of building prices, he referred to the slight downward adjustment in hong kong's building prices, which was expected to keep a close eye on different data and market transactions in the future, and stressed that there was no need to worry too much about the market and finance。
At the time of the interview, chen mobo mentioned that the price of buildings in hong kong had fallen by about 3 per cent in the first half of the year, and rents had been revised by 2 to 3 per cent, which remained stable; in the united states, interest rates on mortgages for housing in hong kong would continue to rise, with short-term domestic market pressure, but it was unlikely that there would be a fall in prices。
In the case of the official price index, since last september, the price of the building has fallen by an average of 0. 88 per cent per month and remains an orderly health adjustment。
Overall, local building prices remain high. Since the end of 2008, housing prices in hong kong have increased cumulatively by more than twice, and the risk of triggering financial risk is relatively low, even if they now fall one to twenty percent. According to the data, by the end of september, the mortgage default rate had fallen slightly to 0. 04 per cent。
“hong kong has been putting in place `hot moves' for several years, but the fact that house prices have not been reversed suggests that the market as a whole has accumulated a significant increase.” according to deng hoji, the hong kong building itself is in fact in need of recall。
The report also states that the future of the residential market will depend in the long run on the shortfall in the supply of and demand for housing, and the government expects that the supply of private housing will remain high in the coming years。
There are concerns about negative assets. In a newspaper article, sha yongqing, the founder of china's estate, stated that since august last year, the hong kong building market had fallen by 15. 2 per cent from its top, not only by 10 per cent of the city's first threshold, but also by 20 per cent towards the second threshold, with a high probability of falling during the year。
He noted that the threshold of 10 per cent and 20 per cent was not because they were “total”, but because buildings under $8 million were available for 90 per cent mortgage。
This means that when the price of the building falls by 10 per cent, the owner who buys it at a high level falls into a negative asset. For small-scale owners, indebtedness remains an important psychological juncture. There are also owners who choose to sell the building and have a chain reaction, which exacerbates the fall in the price of the building。
According to the hong kong report, the number of negative assets in hong kong had increased to 533 by the end of the third quarter. With the fourth quarter price decline, the number of negative assets may increase to over 1,000。
In response to an increase in negative asset cases, chen mobo indicated that the current negative asset cases in hong kong were not high compared to the low tide of 1997-2003, when even over 100,000 negative asset cases were recorded。
It is worth mentioning that the majority of negative asset cases at present come from bank staff and involve mortgage insurance loans and bank staff's home loans, which are more affected when the price of the building is lowered because the mortgage is generally higher。
Liao weiqiang, president of litega estates, also stated that, unlike during the asian financial turmoil in 1997, the total bank lending was low, and that more than 60 per cent of owners had already paid their mortgages without serious negative asset pressure。
Liao weiqiang mentioned that, while hong kong followed the united states interest rate hike, hong kong's modest increase would not put much pressure on homeowners compared to the us-europe “violence hike”. Hong kong is now recovering from the epidemic, and he believes that the price of the building is “not far from the end of the fall”。
