Two Hong Kong banks cut valuation of used homes as civic unrest threatens to knock property bull run off its footing
- HSBC and Bank of China (Hong Kong) have cut valuations for used homes in New Territories and Kowloon by up to 3.6 per cent, according to data on their websites
- The move, the first since valuations were slashed by 20 per cent in October 2018, could push some homebuyers into negative equity
Two of Hong Kong’s biggest commercial banks have cut their valuation of pre-owned homes in several housing estates in anticipation of declining prices, after the city was rocked over the past month by a record number of street protests.
HSBC and Bank of China (Hong Kong), two of the city’s three currency printing banks, cut their valuations for used homes in the New Territories and Kowloon by up to 3.6 per cent, according to data on their websites.
“Valuations have dropped as a result of the political [upheaval in Hong Kong] since early June,” said Centaline Mortgage Broker’s managing director Ivy Wong Mei-fung, who provides financing services at one of the city’s largest real estate agencies.
“Home price corrected in May … the home market was downbeat and homeowners were willing to cut prices. The overall pricing of some estates fell.”
The median home price may fall by 5 per cent in the second half of 2019, according to a forecast published today by global real estate services firm JLL, echoing a similar forecast in May by Knight Frank.
“The difficulties in resolving the ongoing trade war and slowing global economy will ultimately offset the potential of any interest rate cuts to dampen buying sentiment,” said JLL’s chairman and head of capital markets, Joseph Tsang, at a press conference in Hong Kong.
The affected estates are City One Sha Tin, Kingswood Villas in Tin Shui Wai, Metro City in Tseung Kwan O, Mei Foo Sun Chuen and Amoy Gardens in Ngau Tau Kok. A flat measuring 390 square feet at Amoy Gardens had its valuation cut by 3.6 per cent to HK$6.23 million (US$798,000), according to Bank of China.
The last time Hong Kong’s banks cut their valuations was in October 2018, when they slashed 20 per cent off the value of secondary housing in older buildings, a move that pushed buyers who depended on 90 per cent mortgage financing into negative equity.
As many as 262 homeowners ended up in negative equity, the condition where their property values have fallen below their outstanding mortgages, in the fourth quarter of 2018, according to data by the Hong Kong Monetary Authority.
Home sellers will also face more competition, as up to 16,000 flats are expected to be launched for sale in the second half, the most over a six-month period since JLL began tracking the data in 2015, the agency said.
Combined with a looming vacancy tax that will charge developers a levy for hoarding unsold units, and the unlikelihood of any easing in Hong Kong’s cost of money, “we continue to hold a negative outlook over the short- to medium-term”, Tsang added.
Already, some of the effects are felt in the market. A house at the Palm Springs project in Yuen Long, with an area of 1,377 square feet and a garden measuring 1,201 square feet, sold for HK$16.38 million (US$2.09 million) after a discount of HK$2.62 million (US$335,000), about 9 per cent cheaper than market value, according to Centaline.
