Home sales hit 7-year high in May

Volumes rose by 49% YoY to 8,208 deals.

Home sales rose for the third consecutive month by 49% YoY to the highest since Oct 2012 at 8,208 deals in May 2019. According to OCBC Bank, CCL index which tracks secondary property prices rose by 8.6% YTD to an all-time high as of 26th May.

Also read: Hong Kong's property prices hit all-time high

However, Tommy Xie, vice president, head of Greater China Research said that these data prints are lagging indicators, the strong increase in May mainly reflected the wealth effect from stock market rally, eased concerns about local rate hikes and rising worries about decreased housing affordability on scarce long-term supply. “Nevertheless, we see three unfavorable factors looming over the property market.”

First, since US-China trade war re-escalated in early May, investor sentiment has taken a hard hit. Xie said that as a result, the benchmark Hang Seng Index plunged by over 10% and tamed wealth effect. “This has already prompted some buyers to walk away from the purchase of new homes lately.“

Second, Hong Kong Inter-bank Offered Rates (HIBORs) have been elevated as market players continued to hoard cash in the run-up to half-year end, dividend payment season and potential large IPOs. “This in turn pushed up local borrowing costs,” Xie added.

Third, around 5,000 units of public housing will be available around mid-2019 whilst property developers actively launch new home projects before the implementation of vacancy tax. According to Xie, this has propelled some homeowners to lower the offering prices lately.

OCBC Bank expects housing transaction volume and price to retreat from recent highs in the coming months. Housing prices are expected to grow by 8% by the end of 2019. “Should US-China trade war continue to escalate, housing prices will likely see a milder growth this year.”