Hong Kong home prices unlikely to fall to Sars levels during coronavirus outbreak, analysts say

Hong Kong home prices are unlikely to fall during the current coronavirus crisis to levels seen during the severe acute respiratory syndrome (Sars) outbreak in 2003, analysts said.

The two health scares have occurred at different points in the city’s housing cycle. “Sars and the coronavirus outbreak have occurred at completely different points of the housing cycle,” said Phillip Zhong, senior equity analyst for Hong Kong and China real estate at Morningstar Investment Management.

“In the 2000s, the market was already fairly depressed coming off the Asian financial crisis, so Sars extended the decline by one year or so. When Sars came along, the bulk of the fall in prices had already occurred,” he added.

Home prices fell by more than 8 per cent in the first seven months of the Sars crisis, before rebounding for the rest of the year, according to a price index for used homes compiled by the city’s Rating and Valuation Department. The index slumped by 62.5 per cent between a peak in October 1997 and the end of 2002.

This index reached an all-time high of 396.9 in May last year, before falling 4.6 per cent in December. “The coronavirus is clearly different. It occurred at a very high point of the current housing cycle,” Zhong said.

“The impact of the coronavirus on Hong Kong’s home prices will be less than that of Sars back in 2003,” said Vincent Cheung, managing director of Vincorn Consulting and Appraisal. “People in Hong Kong nowadays have also learned their lesson from the Sars outbreak, and have taken much greater safety precautions than they did during the Sars outbreak,” he added.