Hong Kong's official property price index rose for the third month in a row in March, up 1.36% month-on-month, and by nearly 5% in the first quarter, the sharpest quarterly rise in the past four years. However, the increase in the index in March slowed down compared to 2.36% in February. Analysis suggests that this is mainly due to the slower economic recovery and the backlog of new developments caused by the epidemic in the past three years, with more supply in the short term and many new developments selling at discounted prices recently, putting pressure on property prices.
Looking ahead, the United States Federal Reserve next week to discuss interest rates, the market has been psychologically prepared for another interest rate hike, the impact on the property market is expected to be small, the property market is expected to continue to recover this year, but the rise will not be too rapid, the future trend depends mainly on the economic recovery and competition for new properties.
The latest figures released by the Department of Differential Valuation yesterday show that the private residential property price index for March was 351.4 points, up 1.36% from 346.7 points in February, a new high in the past six months. Property prices have risen for three consecutive months since this year, with a cumulative increase of half a percent (4.99%) in the first quarter. The index is also at a six-month high since September last year; if compared with the record high of 398.1 points in September 2021, the cumulative drop in property prices has further narrowed to 11.73%. As for the rental index, the private residential rental index was at 176.3 points in March, up 1.09% month-on-month and up for the second consecutive month.
Mr Chan Hoi Chiu, Head of Property Research at Ricacorp, pointed out that overall property prices rose by 1.36% in March, a smaller increase than expected. However, in addition to the full normalization effect, the authorities also lowered the stamp duty rate for first-time buyers and lifted the masks to achieve full social normalization in March, coupled with the hot sales of new properties, which pushed up the overall property market atmosphere. As for the performance of different types of flats, the 2.18% increase in March was most notable for Class C flats, reflecting the positive performance of property exchange customers and buyers of medium-sized flats.
Centaline Property Asia Pacific Vice Chairman and Chief Executive Officer of the Residential Division, Mr Chan Wing-kit, also believes that the first quarter is the early stage of the property market recovery, and March can be considered the highest point of the first quarter's uptrend, with both first-hand and second-hand prices and volumes increasing, coupled with the restrained pricing of major developers' launches, attracting buyers who have been waiting for a long time to enter the market.
First-hand transactions, for example, saw over 2,100 transactions in March, a 1.3-fold month-on-month rebound and a 22-month high since May 2021. With the US slowing down the pace of interest rate hikes, the financial proposal to reduce stamp duty on properties, the effect of the resumption of customs clearance and the lifting of the masks order, the property price index rose for three months in a row, reflecting a retaliatory rebound in property prices.
Looking ahead to April, Chan Hoi Chiu believes that the market has good and bad factors, including the trend of the top of the U.S. interest rates, and Hong Kong in late March again not to follow the U.S. interest rate increases, the pressure of supply relatively stable. However, the large number of new properties available for sale at discounted or even low market prices from late March to early April will put some pressure on the secondary market, and as most of the market participants are on vacation in early April, the property market has become significantly quieter. As a result, he expects property price increases to narrow further to only about 1% in April, reflecting the slowdown in overall property market transactions.
For the next quarter, Chan Hoi Chiu believes that the property market is still stable to positive, May and June trading volume is expected to pick up, and assuming that the average monthly property prices in the second quarter can maintain a 1% increase, there is a chance that property prices will rise by another 3% in the second quarter, leading to a cumulative increase of about 8% in the first half of the year. It is worth noting that with the satisfactory response to the approval of the Talent Pass Scheme, if successful applicants continue to come to Hong Kong in the second quarter, it will boost the demand for housing and has the chance to further push up property prices, which will rise by another 3% in the second quarter.
Chan Wing-kit said that the property market will enter a consolidation period in the second quarter, property prices will continue to rise, but buyers need time to digest, the pace of transactions may slow down slightly, the overall development of the property market is still healthy. The property market is still in a healthy state of development. From the early part of the year when the market was supported by small units, the mid-priced and even luxury property market is now back on track and transactions are back to normal. With Hong Kong's economy back on track and interest rates topping out, the middle class has regained confidence in the market and is believed to have a greater incentive to buy and rent, which will continue to increase the number of investors entering the market.
Mr Chan believes that the second quarter will continue to be dominated by first-hand transactions as new properties are sold at reduced prices. Property prices will also continue to rise, depending on the pace of future economic growth and whether there is sufficient new purchasing power.
