Hong Kong property: most middle-income households see prices rising now restrictions are in the past, Citibank survey finds

Most respondents considered the dropping of stamp duties to be the most important of the moves to stir the market
Citibank itself forecasts a 10 per cent drop in home prices this year because of high interest rates and inventories

Hong Kong property

Salina Li

Published: 5:15pm, 6 May 2024

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More than half of middle-income households in Hong Kong believe house prices are poised to rally now that all of the restrictions in the market have been scrapped, according to a survey by Citibank.

Of all the cooling measures removed by the government at the end of February, most respondents considered the dropping of stamp duties the most important.

Citibank Hong Kong conducted the survey in April to gauge attitudes to residential property ownership in response to the withdrawal of curbs. It targeted 500 respondents between the ages of 21 and 60, with household incomes of HK$40,000 a month or more.

Among them were 200 who fell into an “affluent segment” with liquid assets of HK$1.5 million (US$190,000) or above.

Almost three quarters of the wealthier respondents expressed an interest in buying a property, versus 62 per cent of their less well-heeled peers. Just 15 per cent of those in the affluent category believe house prices will go down in the next six months to two years, the survey found.

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The optimism of the survey is at odds with Citibank’s own appraisal of the property market. It predicts a 10 per cent drop in home prices this year because of high interest rates and an abundance of unsold units in the primary market.

In his budget speech on February 28, Financial Secretary Paul Chan Mo-po announced the lifting of all of the curbs originally put in place to cool an overheated market. Financing criteria were eased too, with the Hong Kong Monetary Authority now allowing homes valued at less than HK$30 million to be eligible for 70 per cent mortgage financing, compared with the previous cap of 60 per cent for flats valued between HK$15 million and HK$30 million.

“The survey results reflect positive sentiment among the public toward the property market after all the cooling measures were lifted in February, boosting optimism among homebuyers,” said Josephine Lee, head of Citigold and cards and unsecured lending sales, Citibank Hong Kong.

The results come after Hong Kong’s second-hand home prices increased for the first time in almost a year. The average price of a lived-in unit rose by 1.06 per cent in March, according to official data, the first gain in 11 months.

The index climbed to 305.7 from 302. 5 the previous month, according to the Rating and Valuation Department (RVD).

Hong Kong’s property transactions climbed close to a three-year high in April, with 9,880 units changing hands, according to Land Registry data.

The April sales, the highest since July 2021 when 9,957 units including car parks, shops, industrial and office units were sold, were roughly double the number of deals in March, which marked the first full month of a restriction-free property market. The total value of property sales surged by 125 per cent to HK$83.9 billion (US$10.7 billion) from HK$37.4 billion the previous month.

Sales of new and second-hand homes shot up by 115 per cent to 8,551 units from March, data showed.

Although Citibank has forecast a drop in home prices, Lee said high-net-worth individuals are not affected by short-term fluctuations in property prices, as most of them have either bought a house to improve their quality of life or intend to hold into it as a long-term investment.

Citibank predicts that the US Federal Reserve will cut interest rates four times starting in July this year, by 0.25 per cent each time, with the rate ceiling falling to 4.5 per cent.

“However, local banks may not follow the prime rate cuts immediately, so it is estimated that interest rates will not be adjusted significantly until after 2025,” Lee said.

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