Hong Kong home rents are expected to continue rising in the second half of 2023 even as the volatility in home prices persists, Cushman and Wakefield said.
The city’s housing market initially witnessed a recovery in prices after the border with mainland China was reopened in February, according to a report released by Cushman on Thursday. The prices of lived-in homes have recorded a cumulative increase of 4.9 per cent over the last five months, even after the price index recorded its first decline in May and fell by 0.7 per cent, the report said.
But persistent high interest rates, recent stock market volatility and geopolitical tensions are all weighing on sentiment and are expected to dampen a recovery in residential prices, said Rosanna Tang, executive director and head of research at Cushman.
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The leasing market, on the other hand, has reported growth since the reopening of the border, and has also benefited from a pledge made by the Hong Kong government to attract more talent to the city with its Top Talent Pass Scheme, Tang said.
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“This is a good sign for the leasing market,” she added. “And it has already been partially reflected in the rental index, which has risen by 4 per cent over the last four months.”
The rental index will put in a more stable performance compared to the price index this year, and it will also slightly outperform home prices by one to two percentage points, Tang said.
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“The rental index could increase by around 5 to 8 per cent this year,” she added.
The Cushman report comes amid a divergence in forecasts for Hong Kong’s property market in the second half of this year, with some analysts predicting a recovery as the city’s economy rebounds from the coronavirus pandemic, and others warning of ongoing and potential headwinds such as further interest rate hikes.
Cushman said it expected more price volatility in the second half and forecast that home prices will rise by 3 to 7 per cent this year. Raymond Cheng, managing director of CGS-CIMB Securities, said he expected home prices to rise by an average of 5 per cent, with interest rates likely to peak this year. His views were echoed by Derek Chan, the head of research at Ricacorp Properties.
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Knight Frank, on the other hand, has forecast a drop of up to 5 per cent in lived-in home prices for the whole year and said interest rates as a factor will not fade away until early next year. Knight Frank’s forecast followed similar predictions by JLL and Citi.
In a reflection of the sentiment around leasing activity, Sun Hung Kai Properties said on Thursday that it will launch its new flagship rental project, Townplace West Kowloon, in the second half of 2023. The project with a total of 843 units will be tailor-made for young talent moving to Hong Kong following the introduction of the city’s new immigration policy for hiring top talent.
The policy has increased demand for rental options for young professionals dramatically, the developer said in a statement.
More from South China Morning Post:
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