(Journalist Yan Haau-Ling)
The epidemic and social movements have hit the property market in Hong Kong, but Lam Chan-Hung, the Hong Kong Research Department Director of UBS Investment and the Head of China Real Estate Research, expresses yesterday that he is still optimistic about the residential property market trend. The housing supply continues to lack, and the government's speed on land sales and housing construction failed to meet the demand of the following year, resulting in a significant demand being suppressed. Hence, first-hand property sales are satisfactory. But it is expected that property prices will fall by about 5% throughout the year affected by the epidemic. However, property prices would still have better outperforming than the stock market.
Unemployment and economic contraction may affect the market.
Lam Chan-Hung further explained that the rising unemployment rate and the economic contraction had become risk factors for the Hong Kong residential market. Still, Hong Kong Residential Properties have quite a strong defensive force under lack of land supply and US Quantitative Easing Policy. Therefore, he expects a decline in property prices of about 5% for the whole year and believes that the situation of negative assets in Hong Kong is still under control.
According to the Rating and Valuation Department (RVD) announcement at the end of last month, the latest price index of private residential property in Hong Kong in April was 376 points, down 0.13% from 376.5 points in March. In summary, in the first four months of this year, property prices have fluctuated repeatedly with the severity and ease of the COVID-19 epidemic. Still, property prices have not fallen much during the period, only falling by 0.84%. The property prices fell 5.27% compared with the historical high of 396.9 points in May last year.
Besides, according to the HKMA, as of the end of the first quarter this year, the number of "negative assets" of residential mortgage loans in Hong Kong doubled quarterly to 384, and the number of related loans also increased by 1.4 times quarterly to HKD1.867 billion. The rapid increase in negative assets was due to some cases from bank staff with high-percentage mortgages and owners with newly 90% mortgages becoming negative assets when property prices fall.
Office rents may fall by 10%.
Compared to residential buildings, Lam Chan-Hung has a more negative view of the retail and office market. Because half of the retail sales in Hong Kong come from tourists, who had dropped sharply under the global quarantine, and retail properties are now the most affected. The purchasing power of travelers, such as luxury consumption, can be restored to level before the epidemic, is still unknown. Moreover, after the epidemic, consumers will change their consumption habits, and the proportion of online shopping will increase. These will affect retailers' signing leases or sharing profit in the future.
As for the view on the office market, Lam Chan-Hung said that the epidemic has a significant impact on the economy. The company's future expansion demand is not optimistic. It may be possible to implement work from home in the long run and reduce the need for office rentals. He expects that the annual rent will drop by 10%. He also pointed out that the National Security Law Related to Hong Kong Area and the United States' possible cancellation of the special status of Hong Kong will also affect the confidence of the market in commercial properties. But he believes that the United States canceling the special status of Hong Kong will have little effect, and he has not seen the withdrawal of foreign capital from Hong Kong at the same time.
